Muthoot Finance in India’s largest gold loan company. Low tenure, small ticket size and adequate collateral makes gold loans a relatively safe product. Distribution network, quick turnaround and sharp lending and risk management systems are key strengths. Management’s strategy to diversify the loan book is positive for the long term. Fall in gold prices is the key risk as it may lead to default from borrowers, however, rising gold prices do provide additional headroom for growth. The company’s interest spread at ~ 12 % is very attractive. We have an over weight rating due to minimal impact of business operations post lockdown and adequate headroom to grow the book due to higher Gold prices. Increased competition from banks is an area of concern as also stagnant customer base – 03-06-2021 Price: 1511.50 Rating: Over Weight Recommendation : Buy
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