Short-tenure loans help gold financiers shine even as NBFCs, HFCs struggle

While Muthoot has over 12% share of commercial papers in its total borrowings as of September 2018, Manappuram has over 25% in the same period

Among several non-banking finance companies (NBFCs), including housing finance companies (HFCs), which are struggling to gain investors’ confidence in spite of liquidity and margin pressures, gold financiers are standing out. Stocks of two major gold financiers —Muthoot Finance and Manappuram Finance — gained up to 6 per cent in the past one month versus sub-four per cent rise in the Nifty Financial Services index. Analysts believe that loan structure of these companies is helping them.

Gold financiers typically lend for up to one year and reliance on short-term commercial paper does not pose a funding challenge to them, compared to