Muthoot Finance

Update on the Indian Equity Market:
On Wednesday, NIFTY closed in red at 13,478 (-0.38%). Top gainers in NIFTY50 were Nestle (+4.1%), ITC (+3.8%), and Britannia (+3.1%). The top losers were UPL (-11.3%), Ultra Cement (-3.3%), and Shree Cement (-2.8%). The top sectoral gainers were FMCG (+2.8%), REALTY (+0.4%), and METAL (+0.2%) and the sectoral losers were MEDIA (-1.6%), PSU BANK (-1.5%), and AUTO (-0.9%).

Excerpts of an interview with Mr. George Alexander Muthoot, MD – Muthoot Finance with CNBC TV18 dated 9th December 2020:
• 3QFY21 has seen a reasonable pick up in the gold loan financing business and the demand for gold loans among MSME and small shop owners have been recovering, according to Muthoot Finance.
• Gold loans would do well in the coming days as the demand in most places has risen reasonably.
• In Q3FY21, they are seeing a reasonably good pick up in gold loan demand. Everywhere things are starting to open up, so probably business should come back to what it was pre-COVID.
• As far as gold loan is concerned, they see good pick up in the demand and they see gold loan companies doing well in the coming days.
• He expects to see a minimum of 15 percent assets under management (AUM) growth on a
• Year-on-year (YoY) basis in the next four-five years.
• Gold prices are expected to stabilize near Rs 50,000 per 10 grams level going forward.
• Banks get bigger loans while NBFCs get smaller ticket-sized loans.
• Muthoot Finance plans to open around 100-150 branches in the next 12 months.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of MUTHOOTFIN was ₹ 1,183/- as of 10th December 2020. It traded at 3.6x/ 2.6x/ 2.2x the consensus Book value estimate of ₹ 364/ 451/ 540 for FY21E/FY22E/23E respectively.
• The consensus price target of MUTHOOTFIN is ₹ 1,300/- which trades at 2.4x the book value estimate for FY23E of ₹ 540/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”