Muthoot Fin hits new high; overtakes PNB, AU Small Fin Bk in m-cap ranking

The stock has rallied 26% in the past week on the back of strong financial performance in the December quarter (Q3F20)

Shares of Muthoot Finance scaled 7 per cent to hit a new high of Rs 935 on the BSE on Thursday. The stock of India's largest gold financing company, in terms of loan portfolio, surpassed its previous high of Rs 898 touched on Tuesday, February 18, 2020.

A sharp rally in the market price of Muthoot Finance has led to its market capitalisation (market-cap) touching Rs 36,823 crore, the BSE data shows. With this, the company overtook financials like AU Small Finance Bank (Rs 35,657 crore), Punjab National Bank (Rs 35,843 crore) and IDBI Bank (Rs 35,969 crore) in the m-cap ranking.

At 11:37 am, Muthoot Finance stood at 78th position, also surpassing Colgate-Palmolive (India), Procter & Gamble Hygiene & Health Care, Cipla, Piramal Enterprises, and Aurobindo Pharma, in the overall m-cap ranking.

In the past week, Muthoot Finance has soared 26 per cent after the company reported a 66 per cent year-on-year (YoY) growth in net profit at Rs 803 crore in the December quarter (Q3FY20). It had reported a profit of Rs 485 crore in the year-ago quarter.

Besides, Muthoot Finance’s profit before tax (PBT) grew 38 per cent at Rs 1,080 crore on a YoY basis in Q3FY20, while Net interest income (NII) grew 43 per cent, majorly on the back of strong assets under management (AUM) growth of 19 per cent. AUM growth has been driven mainly by the gold loan portfolio, th company said.

Analysts at Narnolia Financial Advisors remain optimistic about the stock as the liquidity crisis has resulted in an increased preference for gold loan financing. "Even though the cost of funds is trending at a higher range, the management has been able to pass on the hike in cost thus maintaining margin," they said.

“Immunity from liquidity crisis, inability of weaker NBFCs to lend, firm gold prices and strong marketing activity should ensure good growth in times to come. For a business with high fixed costs, growth brings in permanent efficiency gains. Muthoot is poised to grow its loan book & earnings at 19 per cent & 38 per cent CAGR over FY19-22,” analysts at Antique Stock Broking said in results review.