Business Standard

Muthoot's strong Q1 show fails to cheer investors, stock sheds 4%

Concerns remain over asset quality of non-gold biz

The company is now valued at $7 billion, a size that may spur MSCI to include the stock in its gauge at the quarterly review due in August
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The company also faced margin pressure, on a sequential basis, in Q1 led by higher funding costs and lower yield

Shreepad S Aute Mumbai
Despite a strong pre-tax profit growth of 37.8 per cent year-on-year (YoY) in the June quarter (Q1) of financial year 2020-21 (FY21), gold finance major Muthoot Finance’s (Muthoot’s) stock fell over 4 per cent since it announced the results on Wednesday. Expensive valuation and concerns over asset quality of its non-gold businesses are hurting investor sentiment.

Rising gold prices are improving the overall outlook of gold finance companies like Muthoot in terms of loan book growth and asset quality. However, its current valuation at 3 times its FY22 estimated book value, which is higher than some major non-banking finance companies (NBFCs),

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