The upgrade reflects S&P’s assessment that Muthoot Finance will maintain its “excellent capital and earnings” over the next 12 months, while benefiting from the strengthening regulatory environment, particularly for upper-layer fincos in India. “We expect some stress in the asset quality of Muthoot’s microfinance subsidiary, in line with the industry. That said, we expect the company to maintain overall asset quality, thanks to the dominance of its highly collateralised gold loan portfolio,” S&P Global Ratings added.
It said that Muthoot is one of the largest players in the gold loan market, focusing on loans against gold jewellery, but is relatively small within the overall financial sector in India. “We expect the company to maintain its strong market position despite increasing competition,” it added.
S&P Global Ratings said Muthoot benefits from strong brand recognition and a proven track record in gold loans. “While banks have become aggressive in this lucrative segment, we believe Muthoot will retain its market position due to its extensive experience and expertise in this niche,” it said.
Muthoot’s managing director George Alexander said the rating upgrade reflects its continued progress in strengthening its balance sheet, profitability, enhancing operational efficiencies, and executing sustainable growth strategies.
Muthoot Finance shares ended the previous trade session 1.52% points higher at ₹2,324.95 apiece. The stock has gained 14.22% in the last six months.
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