Muthoot Finance shares crash 10% after Q1 results. What Motilal, other brokerages said

Standalone assets under management (AUM) grew 43% year-on-year (YoY) and 6% quarter-on-quarter (QoQ), while consolidated AUM rose 43% YoY and 5% QoQ. The moderation followed eight straight quarters of exceptionally strong growth driven by surging gold prices.

Motilal Oswal has retained a Neutral rating on Muthoot Finance with a target price of Rs 2,850, signalling that intense rivalry in the gold loan market could keep margins under pressure. Although the management has cut prices to hold on to its market share and anticipates yields to settle around 18-18.5%, the brokerage observes downside risks as bigger, well-funded NBFCs aggressively push into the space. For FY27, Motilal Oswal expects standalone gold loan growth of 22%, but predicts net profit will grow just 4-5% as the lender trades profitability to protect its customer base.

For the April-June quarter (Q1 FY27), Muthoot Finance posted a net profit of roughly Rs 2,550 crore. That is up 25% compared to the same period last year, but marks a 17% drop from the previous quarter. The brokerage believes margins will stay tight over the next few quarters as competitors fight for market share, making rivals’ response to Muthoot’s latest rate cuts a key factor to watch.

Nuvama has retained its Reduce rating on Muthoot Finance while setting a target price of Rs 3,300. The brokerage pointed out that while the company’s push for competitive pricing is helping boost customer count and gold tonnage, pressure on margins remains a major worry. It noted that future loan growth will stay closely tied to gold price fluctuations, forecasting AUM growth of around 25% for FY27 before slowing to 12% in FY28.

Nuvama noted that the main factor to track going forward will be how net interest margins (NIMs) hold up against aggressive competition in the gold loan space. The brokerage expects NIMs to settle around 9.5%, with return on assets (RoAs) easing from 5.4% in FY27 to roughly 5.0% in FY28 as competitive pressures limit yield expansion.

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Equirus Securities has maintained its Reduce call on Muthoot Finance with a target price of Rs 3,150, indicating that even though price cuts are helping bring in fresh customers and build gold tonnage, shrinking margins remain a big headwind. The brokerage noted that future growth will stay heavily dependent on where gold prices head, projecting loan book expansion of around 25% this year before slowing to 12% in FY28.

Also read: Thangamayil Jewellery shares crash 32% in a week. What should investors do?While total AUM hit Rs 1,720.5 billion during the quarter, up 5.7% sequentially thanks to a pickup in gold loans, profitability took a noticeable hit. Net interest margins dropped nearly 3 percentage points to 10.4%, squeezed by recent interest rate cuts and a shift toward lower-yielding loan products. On top of that, early-stage bad loans (Stage-2 assets) nearly doubled to 1.1% as borrowers adapt to new RBI norms for shorter-tenure loans. Equirus also expects margins to eventually reduce near 9.5%, with return on assets sliding toward 5.0% by FY28 as fierce competition keeps pricing power in check.

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