Muthoot Finance Limited is a “Systemically Important Non-Deposit Taking NBFC” (NBFC-ND-SI) and the largest gold loan Non Banking Finance Company in the country. The company’s operating history has evolved over a period of 80 years since M. George Muthoot founded a gold loan business in 1939 under the heritage of a trading business established by his father in 1887. It is a trusted pan India brand in the gold loans sector having revolutionised gold banking in the country.

By this intervention, it has empowered millions of people across the social pyramid. It provides business and personal loans secured by gold jewels and gives loans primarily to individuals who possess gold jewels, but cannot access formal credit within a reasonable time or to whom credit may not be available at all to meet unanticipated short term needs. The company has a network of over 4,500 branches across the country serving about 2,00,000 plus retail customers every day for gold loans and other products.

Rural India accounts for 65% of the total gold stock in the country as a large portion of the rural population has limited credit access. Hence, the company primarily caters to the underserved rural and semi-urban markets with a strong branch and brand presence. The company offers multiple service offerings apart from its core business of gold loans such as money transfer, personal loans, collection services, home loans, etc. At a glimpse, Muthoot Finance has a range of interest in the field of financial services, healthcare, education, plantations, real estate, foreign exchange, information technology, insurance distribution and hospitality. The promoters have a strong interest in their business with a 74% equity stake in Muthoot Finance Ltd. The company reported decent Q1FY21 financial results with net sales at Rs 2,385 crore up 28% from Rs 1856 crore, while the net profit stood at Rs 840 crore, up 58% from Rs 530 crore respectively of the same period for the last fiscal.

Loan assets stood at Rs 41,296 crore compared to Rs 35,816 crore for the previous year registering a year-on-year growth of around 15%. But during the first quarter of FY21, loan assets decreased by Rs 315 crore on account of closure of branches during April 2020 due to the pan India lockdown in the wake of the Covid-19 pandemic. The company’s earnings per share increased to Rs 20.96 in June 2020 from Rs 13.23 for June 2019.

The Sri Lankan subsidiary, M/s Asia Asset Finance PLC where Muthoot Finance holds a 72.92% stake, increased its loan portfolio book to LKR 1,348 crore against LKR 1,290 crore last year. Muthoot Money Ltd is a wholly owned subsidiary of Muthoot Finance Ltd  and a RBI registered Non Banking Finance Company, engaged mainly in extending loans for vehicles, but has recently started extending loans for commercial vehicles and equipment.

The Muthoot Finance stock currently quoting at Rs 1,206 on the bourses can be bought by portfolio investors for a one-year time horizon for a 20% price appreciation.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.