June 9, 2025
Finance

Muthoot Finance a likely rally candidate over Manappuram after new gold loan norms: Morgan Stanley


Global brokerage firm Morgan Stanley, in a note on gold loan companies, said the final regulatory norms announced by the Reserve Bank of India (RBI) are a diluted version of the earlier draft, especially benefiting smaller-ticket loans. This was also highlighted by the RBI Governor during the post-policy press conference.

Key beneficiaries include Muthoot Finance and Manappuram Finance, on which Morgan Stanley has maintained an ‘Equalweight’ rating. Shriram Finance and Bajaj Finance are also likely to benefit, and both carry an ‘Overweight’ rating from the brokerage.

Despite recent gains in the stock, Morgan Stanley believes Muthoot Finance has more room to rally with a strong earnings outlook for Q1 FY26 and the full year.

While Manappuram Finance also stands to gain, the brokerage believes that the stock is unlikely to move above Bain Capital’s open offer price of ₹236 until the deal is completed.

Meanwhile, Jefferies said that the RBI’s final gold loan guidelines are more relaxed than the draft version, with key changes including:

– A tiered loan-to-value (LTV) cap, allowing up to 85% LTV (including accrued interest) for consumption loans below ₹2.5 lakh, compared to the earlier proposed 75% for all loans.

– No mandatory credit appraisal for loans of ₹2.5 lakh or less.

– Removal of the end-use monitoring requirement.

Jefferies said these changes should reduce concerns about growth and operating cost pressures for gold loan NBFCs. The brokerage continues to prefer Muthoot Finance in this space.

The central bank has increased the loan-to-value (LTV) ratio on gold loans up to Rs 2.5 lakh to 85% per borrower, up from the 75% proposed in the draft norms issued in April this year.

For gold loans more than Rs 2.5 lakh and up to Rs 5 lakh, the LTV ratio has been set at 80%. For loans more than Rs 5 lakh, the central bank has set an LTV of 75%.

The RBI said that the new norms will come into effect from April 1, 2026.



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