Sunday, November 08 2020
Gold loan providers have reaped benefits from the surge in the yellow metal’s prices, apart from the emergency borrowings triggered by the covid-19 pandemic.
Both Muthoot Finance Ltd and Manappuram Finance Ltd have shown healthy growth in terms of profitability.
On Friday, Manappuram Finance reported 21% growth in operating profit for the September quarter as margins remained steady and loan growth healthy. The lender has also kept its asset quality steady with gross bad loans forming just 1.11% of its total loan book.
However, the future profitability of gold loan lenders hinges largely on their growth rates. The assets under management (AUM) for Manappuram Finance grew 29.6% in the September quarter for gold loans. But peer Muthoot Finance trumped that with 32% growth—its highest quarterly growth rate in a decade. In essence, Indians are borrowing more by pledging their gold with lenders. Indeed, even banks have been pushing gold loans recently. The more than 30% rise in gold prices in India so far in 2020 is also fuelling this loan growth.
The management commentary has been positive from both lenders. Muthoot Finance expects its loan growth to be 15%, while Manappuram Finance, in a call with analysts, has stood by its earlier guidance of 10-15% growth.