Geojit does a U-turn on Muthoot Finance stock; what suddenly happened?

Geojit Investments has upgraded Muthoot Finance stock to ‘Hold’ from ‘Sell’ with an upward revision in target price to ₹3,478 per share from ₹3,350. The brokerage cited improving visibility in loan book growth and signs of stabilising asset quality as supportive factors for the company’s medium-term outlook.

 

However, it maintained a cautious view on Muthoot Finance given the stock has been under pressure in recent sessions amid volatility in gold prices and a marginal decline in gold collateral tonnage, factors that have raised near-term uncertainty around growth momentum in the gold loan business. It also pointed out that the stock is currently trading at a historical premium to its long-term average, indicating that the recent correction may already reflect much of the quarterly positives.

 

Muthoot Finance Q3 performance 

The gold financier reported a strong performance in Q3FY26, with sharp growth in assets under management (AUM), higher profitability, and improved asset quality, even as volatility in gold prices and a marginal decline in gold collateral tonnage weighed on investor sentiment.

 

The company operated a network of 7,541 branches across India. In addition to gold loans, it offers other loans, insurance, and money transfer services, and sells gold coins through subsidiaries.

 

In Q3FY26, consolidated loan AUM rose 48 per cent year-on-year (Y-o-Y) to ₹1,64,720 crore, led by 51 per cent Y-o-Y growth in standalone gold loans, which now comprise 89 per cent of total AUM at ₹1,47,552 crore. 

Yields supported by recoveries; normalised yields seen lower

Gold loan yield for Q3FY26 stood at 20.34 per cent, aided by one-off non-performing asset (NPA) recoveries, according to Geojit Investments. On a normalised basis, yields are expected to settle in the 18.5 per cent–19 per cent range, suggesting that the quarterly yield print may not be fully sustainable.

Profitability strengthens; asset quality improves sharply

Profitability also remained robust, noted the brokerage. Standalone profit rose 91 per cent Y-o-Y to ₹7,048 crore in 9MFY26, supported by stronger operating efficiency and margins, the note said.

 

Asset quality improved meaningfully, with the Stage III ratio in the gold loan portfolio falling to 1.58 per cent in Q3FY26, from 4.22 per cent in the same quarter last year. The brokerage attributed the improvement to customer-led repayments, supported by flexible repayment options.

Collateral tonnage dips; LTV steady at 57 per cent

Muthoot Finance held 205 tonnes of gold as collateral at the end of Q3FY26, slightly lower than 209 tonnes in the previous quarter. The average portfolio loan-to-value (LTV) stood at 57 per cent.

 

While fluctuations in gold prices remain a key risk factor for the sector, the company is viewed as maintaining a comfortable cushion. The brokerage highlighted a margin of safety of around 43 per cent, which can help limit potential credit risk during periods of price volatility.

 

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