CLSA upgrades Muthoot Finance, raises price targets for gold financiers amid strong growth

Shares of gold financiers such as Muthoot Finance Ltd. and Manappuram Finance Ltd. will be in focus during Tuesday’s trading session. Global brokerage firm CLSA has upgraded Muthoot Finance to an ‘Outperform’ rating from its earlier ‘Hold’ rating and raised its price target to ₹2,400 per share.

The foreign brokerage has also given an ‘Outperform’ rating to Manappuram Finance and increased its price target to ₹225 per share.

In its note on gold financiers, CLSA said that momentum in the gold loan segment during the first nine months of FY25 (9MFY25) has remained robust.

Banks have reported 70% year-on-year growth in this segment as of December 2024, led by SBI, the brokerage noted.Muthoot Finance and Manappuram Finance have also benefited from this momentum and restrictions on peers, according to CLSA.

Last July, Jefferies initiated coverage on Muthoot Finance and Manappuram Finance, citing multiple supportive factors for gold prices.The brokerage believed that gold-focused non-banking financial companies (NBFCs) benefit from rising gold prices and are expected to gain from reduced competition and diversification.

Jefferies had said that asset quality risk in gold lending is low, with superior returns on equity (ROE) compared to most NBFCs. It added that valuations appear reasonable in this context.

Jefferies said that it preferred Muthoot Finance, given that 82% of its assets under management are in gold, allowing better leverage on gold prices.

Meanwhile, the brokerage said that Manappuram Finance is focusing on diversification and offers an attractive valuation.

On Monday, shares of Muthoot Finance ended 2.03% lower at ₹2,198.90, while Manappuram Finance settled 2.63% lower at ₹203.15.