Muthoot Finance targets 25% AUM growth in FY27, plans to expand branch network

Alexander George Muthoot, Managing Director of Muthoot Finance, said the company is focusing on new customer acquisition through its analytics and omnichannel capabilities. The company has also added 262 branches in the first half of FY27 and expects to add a similar number in the second half.

Kerala-based lender Muthoot Finance has raised its growth guidance for the second half of FY27 by 10 percentage points and is now targeting 25% growth in assets under management for the full financial year, after reporting 15% growth in the first half.

Alexander George Muthoot, Managing Director of Muthoot Finance, said the company is focusing on new customer acquisition through its analytics and omnichannel capabilities. The company has also added 262 branches in the first half of FY27 and may add a similar number in the second half.

It believes that expansion, along with improving productivity at existing branches, will support business growth. Average gold loans per branch have increased to ₹34 crore, which the company says is the highest in the industry.

In the July-September 2026 quarter , Muthoot Finance reported net interest income of ₹5,365 crore, profit after tax of ₹2,976 crore and net interest margins of 11.93%.Let's talk about some of the positives, particularly on growth. Pricing is not entirely in your hands because gold prices have been fluctuating. However, we are seeing tonnage growth. Despite all the discussion around competition, with your eight to nine decades of experience, it appears that you are gaining market share. Do you expect this trend in tonnage growth to continue?Tonnage is also correlated with gold prices. When gold prices fall, customers have to bring more gold to our branches to get a higher loan amount.

When gold prices rise, they need to bring a smaller quantity of gold.As far as new customer acquisition is concerned, Muthoot Finance has always taken the lead in introducing initiatives to reach more customers. We are strengthening our capabilities through our analytics and omnichannel teams to accelerate new customer acquisition.That is why we disbursed ₹20,238 crore to 9.93 lakh customers during the first half of this financial year.The gold finance category is growing rapidly. As the industry leader, category leader and one of the most trusted financial services brands, we are well positioned to benefit from the growing customer interest in this category.With our distribution network and corporate governance framework, we are in a strong position to scale up the business further.

New customer acquisition remains a key focus area for us.For the full year, what is your guidance on AUM growth?We have achieved 15% growth in the first six months. We have revised our guidance upwards by another 10 percentage points for the second half. Overall, we are targeting around 25% growth for the full year.There has been a sharp quarter-on-quarter increase in Stage 2 and Stage 3 loan assets. What has led to this rise? Are borrowers unable to pay, or is it because of the RBI regulations? What is behind the sharp increase?With the new RBI regulations, the gold loan product has undergone a change.

Earlier, it was typically a bullet payment scheme. Under the new schemes, borrowers have to make monthly interest payments, or opt for three-month or six-month payment cycles.Our borrowers are going through a transition as they get used to servicing interest regularly. This is not because they do not have the money or the intention to pay. It is simply a transition that our customers are going through.With our distribution network, trained manpower of over 32,000 people and more than 5,000 branches, we can easily educate and sensitise customers to start making regular payments.If you look at the loan-to-value ratio on the principal amount, it is only 53% for Stage 3 loans and 72% for Stage 2 loans.

The point I am making is that 98% of our customers pay their loans regularly. The increase does not reflect an inability or unwillingness to pay. It is a transition phase, and I am confident that customers will repay and regularise these loans.I just want to clarify those numbers. Are you saying the LTV for Stage 2 loans is 53% or 72%? What is the figure for Stage 3?Stage 2 is 72%, and Stage 3 is 53%.You are saying this is essentially related to the newer loan tenures and monthly interest repayments. Is this because of the RBI rules? Do they require the LTV to be maintained throughout the loan tenure rather than only at the time of disbursal?

Is that why the product has undergone a change?When the new RBI regulations came into effect on April 1, shorter-tenure loans were introduced, along with regular interest servicing requirements and monthly interest payment schemes.Earlier, it was a 12-month bullet payment cycle, and an account was declared an NPA after 15 months. Now, when interest is not serviced regularly, whether monthly or over shorter periods such as three or six months, the account can become a technical NPA.I call it a technical NPA because, as I mentioned, the LTV ratios are very low. There is absolutely no loan loss taking place here.At Muthoot Finance, auctioning is always the last resort.

We focus on nurturing relationships with our customers and ensuring that they repay on time. As I said, this is just a transition period. Our customers will service these loans because the LTV ratios are low. They stand to lose their gold jewellery if they do not repay, so they will come back and regularise their loans.This is only a transition phase. There is nothing to be concerned about, and I am confident that the situation will normalise and stabilise in the coming quarters.Alex, Stage 2 loans account for 12.5% and Stage 3 loans for 3.87%, correct? How do you expect these numbers to normalise?

You have said this is temporary and will settle down. How do you see Stage 2 and Stage 3 loans trending quarter after quarter?Of the ₹7,023 crore in Stage 3 loans, ₹3,798 crore is pure Stage 3 exposure, while the remaining ₹3,225 crore comprises Stage 1 and Stage 2 loans of the same Stage 3 customers.As I mentioned, the LTV on the principal amount for these Stage 3 loans is only 53%. These are relatively old legacy loans, given when gold prices were lower.Similarly, of the ₹23,113 crore in Stage 2 loans, ₹13,062 crore is pure Stage 2 exposure, while the remaining ₹10,051 crore comprises Stage 1 loans of the same Stage 2 customers.The LTV on the principal amount for these Stage 2 loans is only 72%.

These loans are relatively new and were given when gold prices were higher.These customers are in a position to close their loans if they wish to. As I said, auctioning gold jewellery is always our last resort because the LTV is much lower than the prevailing gold price.Around 98% of our customers have always paid their loans regularly. They are going through a transition, and the situation will normalise.Could you put some numbers around this? Given the current Stage 2 and Stage 3 levels of 12.5% and 3.87%, respectively, where could these figures stand by the end of FY27? Also, your provisions have increased significantly quarter on quarter, almost tenfold.

Do you expect credit costs to remain high?I cannot give you a specific number for where these figures will settle because, as I said, this is a transition period. It is about educating customers, and with our 32,000 staff members and extensive branch distribution network, we are well positioned to do that.I cannot give you a specific number at this stage, but I am confident that the situation will normalise over the coming quarters.As far as credit provisioning is concerned, the increase is primarily because loan assets grew by ₹15,757 crore during the quarter, while Stage 3 loans increased by ₹3,342 crore.It also includes ₹102 crore of bad debts written off, primarily arising from the aggressive 100% write-off of unsecured personal loans that remained overdue for six months.

These are the reasons behind the increase in provisioning. Beyond this, there are no other concerns.You mentioned that a significant portion of Stage 3 loans comprises Stage 1 and Stage 2 loans belonging to the same customers. Is that correct?Correct. Of the ₹7,023 crore, ₹3,798 crore is purely Stage 3 exposure, while the remaining ₹3,225 crore comprises Stage 1 and Stage 2 loans of the same Stage 3 customers.If a customer is non-standard in one category, the other loan accounts also fall under the NPA category. That is the RBI classification, right?That is a borrower-wise classification introduced by the RBI.I wanted your comment on something.

There was a lender with a smaller gold loan book that suggested borrowers were overleveraging themselves. In other words, they already have two or three loans and are taking another one. Based on your customer base, have you observed anything similar? Given that you are the largest player in this segment, what is your assessment?We do not see any such issue in our business. Given our core domain expertise in the gold financing segment, around 98% of our customers repay on time. We do not see any stress among our customers.We focus on building relationships with customers through our distribution network, and we have not observed any such stress.

I cannot comment on another lender's experience.As a percentage of your portfolio, can you tell us how many of your customers also have a gold loan with another lender? I understand if you do not have an exact number.We do not have an exact number of customers who have gold loans with other financial institutions.Alex, you have clarified two points. First, you are not seeing significant stress in the system. Second, despite the highly competitive environment, you are still growing your loan book, with a focus on acquiring new customers. Is that correct?Absolutely. The foundation of our business model is trust.

Over the decades, we have built that trust and nurtured relationships with our customers. That is why we have been recognised as India's number one most trusted financial services brand.This trust is something we have built with customers over generations, and it has helped us grow.As we expand our branch network, we expect further growth. This year alone, we have added around 262 Muthoot Finance branches in the first half. We may add a similar number in the second half as well. The expansion of our distribution network will also support growth through new branches.Alex, one more point. I am not sure whether you were tuned in to our pre-opening discussion about various stocks.

We made the point that the company is currently trading at single-digit valuations. You reported standalone PAT of close to ₹10,000 crore. A couple of brokerage estimates suggest that net profit could reach ₹14,000-15,000 crore over the next two years. Do you think that is possible, considering the trends in yields, growth and other factors?We sincerely hope so, and we will work hard to make that happen. However, I cannot give you a specific number for where we will reach.As an organisation, we have never been complacent about our past success. Instead, we have continued to build on our trust and credibility while introducing initiatives to grow our loan book through new branches and improved productivity at existing branches.The average gold loan per branch has now increased to ₹34 crore, which is the highest in the industry.

Improvements in productivity at each branch, along with the new branches we are opening, will further accelerate our growth.Alex, I have a different question. We have been discussing competitive intensity over the past several quarters. Gold loans are a good product, and realised credit losses are very low in this business. As a result, several players have entered the segment. However, with the new RBI rules, it could be operationally more challenging for larger players entering this segment for the first time. Do these regulations mean less competition for you? Could some of the larger players pull back or scale down their focus on this business?

What is your assessment?There are two aspects to this. First, if larger players are looking at cross-selling gold loans to their existing customers, a loan becoming an NPA could affect the borrower's entire portfolio because of the borrower-wise classification. This could be a challenge for them.Gold loans have been our flagship product. We have seen several cyclical changes in this business and have also experienced periods of higher NPAs in the past. However, we have always managed to normalise the situation.While many players have entered this segment, gold financing is a very operationally intensive business.

This is something we have mastered over the years and decades of our existence.We have a strong governance framework, regional offices and zonal offices, along with 1,200 internal auditors. We have always maintained the highest standards of corporate governance.While the business may look attractive from the outside in terms of its numbers, it requires considerable operational focus and strong governance standards to run it properly.This is something we have fine-tuned and mastered over the decades. Our focus on gold loans as our core product is a significant differentiator between us and our competitors.Watch accompanying video

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