Kolkata: After RBI governor Sanjay Malhotra heralded changes in the gold loan stipulations and LTV (loan-to-value) ratio was hiked from 75% to 85% for gold loans up to Rs 2.5 lakh per borrower, stocks of major companies in the gold loan market surged. Of the key stocks in this domain, brokerage major Jefferies has picked Muthoot Finance for quite a few reasons.
The stock of Muthoot Finance was one of the key shares in focus after the RBI revision of gold loan regulations. After close of the trading session on Monday, June 9, it was seen that the stock was at Rs 2,542.90, up nothing less than 3.95% and gained Rs 96.70 in a single session. By the way, the 52-week high and low of this share price is Rs 2,548.00 and Rs 1,664.60 respectively.
Target price
Jefferies has set a target price of Rs 2,660 per share for Muthoot Finance. This target price shows that the international brokerage thinks that the stock can rise 4.6% from the current level of Rs 2,542.90.
Jefferies has highlighted how the relaxation of gold loan norms can eliminate “key overhang related to possible impact on loan growth for gold financiers due to tighter LTV norms proposed in earlier draft.”
The valuation prism
The price target set by the brokerage major has the following basis: “2.6x P/BV (June FY27) for the standalone business and 0.8x P/B June 2027 for the MFI subsidiary.” Jefferies also said that the target assumes 1.1x P/B by June 2027 for the housing subsidiary and 10x PE by June 2027 for the insurance broking subsidiary. Muthoot Finance has a home finance subsidiary called Muthoot Homefin (India) Limited and an insurance subsidiary known as Muthoot Insurance Brokers Pvt Ltd, which offers insurance plans, including life, health, and vehicle insurance.
While Jefferies thinks that the gold loan regulations will have an upward pressure on growth, there are also some risks. These are a decline in gold prices, lower growth, higher net interest margin pressure etc.
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Gold stocks have come under focus after the relaxation if gold loan norms for an amount of Rs 2.5 lakh per borrower when RBI relaxed the LTV from 75% to 85%. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
