Muthoot Finance: FY26 growth guide to 35% as RBI eases norms

RBI sets a February 2026 tailwind for large gold-loan NBFCs

The Reserve Bank of India has introduced a regulatory change that could make expansion easier for large gold-loan NBFCs. Under the revised framework, eligible entities with more than 1,000 branches will no longer need prior approval for branch expansion. The change is set to take effect from February 2026. The stated objective is to improve operational flexibility, especially for established players with large physical networks.

For gold-loan lenders, branches remain central to origination and servicing because the product involves physical collateral. In that context, faster network decisions can directly affect turnaround times for adding capacity in high-demand pockets. The development comes as demand for loans against jewellery rises, supported by higher gold prices and tighter norms in unsecured credit.

Why branch flexibility matters in gold loans

Gold-loan lending is built around quick appraisal, secure custody, and short-tenor servicing at the branch. The model typically involves customers bringing jewellery to a branch, where staff check purity before disbursing a loan of up to 75% of the collateral value. A minimum of 18-karat gold is required. Borrowers usually take loans for four to 12 months.

Pricing in the provided information indicates Muthoot Finance charges around 1% to 1.5% per month, with annualised rates that can exceed 19%. In such a model, branch density and repeat footfalls influence both growth and cost efficiency. The RBI’s removal of prior-approval requirements, effective February 2026, reduces procedural friction for NBFCs already operating at scale.

Muthoot Finance’s scale and branch productivity

The text points to Muthoot Finance as a key beneficiary of the easing in branch norms. One reference highlights the company operating over 4,800 branches, while another states its network reached 7,391 branches by the end of Q4 FY25, after opening 850 new branches in FY25. Separately, management has spoken about having 5,000+ branches, and another reference describes a 7,500-plus branch network.

On operational efficiency, Muthoot is cited with Assets Under Management (AUM) per branch of about ₹28.10 crore, and around 1,300 customers per branch. This branch productivity is linked to lower operating expenses relative to assets. Another operating metric reported is an average gold loan per branch of ₹25.15 crore.

Credit ratings, returns, and valuation signals

On the balance-sheet and ratings side, the information notes upgrades in 2025, with Fitch moving its long-term rating to ‘BB+’ and Moody’s to ‘Ba1’. On market performance, the stock is described as delivering an 81% annual return and hitting record highs in late 2025, supported by strong loan demand and a favourable gold price environment.

Valuation commentary in the provided material places the company’s P/E in a band of about 15.5x to 18.5x. The same context frames this as comparatively “more grounded” relative to growth prospects, but the data presented remains the key anchor for investors assessing risk-reward.

FY26 performance: record profit and AUM milestones

Muthoot Finance reported strong operating performance in Q2 FY26 (July to September quarter). Standalone net profit was ₹2,345 crore, up 87.4% year-on-year from ₹1,251 crore. As of September 30, 2025, standalone loan AUM was reported at ₹1,32,305 crore, while gold loan AUM was ₹1,24,918 crore.

A separate update also references standalone loan AUM at ₹1,20,031 crore and gold loan AUM at ₹1,13,194 crore, alongside a stated 42% year-on-year increase in loan AUM and 40% year-on-year increase in gold loan AUM. The quantity of gold jewellery held as security is reported at 209 tonnes, up from 199 tonnes year-on-year.

Guidance raised as demand stays strong

Management commentary indicates Muthoot Finance upgraded its FY26 gold loan growth guidance to 30% to 35%, from 15%, citing record performance. The drivers listed include favourable RBI regulatory changes for the gold-loan sector, higher gold prices, and tighter norms for unsecured credit. The company also indicated it will expand non-gold loans such as personal, home, and business loans while maintaining total non-gold loan AUM, including microfinance, at about 12% to 15% of the consolidated loan portfolio.

Separately, the text notes consolidated loan AUM reaching ₹1.47 lakh crore in H1 FY26, which is ₹147,000 crore when expressed in crore units.

Funding and capital actions: NCDs and subsidiary infusion

The board has approved an incremental fund raise of up to ₹35,000 crore through non-convertible debentures (NCDs) in multiple tranches. It also approved an additional equity infusion of ₹500 crore in Muthoot Money Ltd, a wholly owned subsidiary.

These steps were disclosed alongside operating updates, as the company highlighted strong demand and continued execution on growth. The information also notes that Muthoot’s average loan-to-value (LTV) ratio is 62%, below the RBI cap of 75%.

Competitive context: branch additions and bank participation

The broader gold-loan market is described as entering a phase of aggressive physical expansion. Non-bank lenders are planning to add around 3,000 branches over the next 12 months, focused exclusively on loans against jewellery. Segment leaders including Muthoot Finance, Muthoot Fincorp, IIFL Finance and Bajaj Finance are expected to open about 1,800 branches in total.

The demand narrative includes a quote from George Alexander Muthoot stating gold-loan demand is rising sharply as more borrowers struggle to access unsecured micro loans and turn to gold-backed credit. Another datapoint compares outstanding gold loans at Muthoot at ₹125,000 crore at end-September, higher than State Bank of India’s ₹72,550 crore in similar loans.

What brokerages are saying

Analysts are generally positive but differ on targets and ratings. Jefferies reiterated a ‘Buy’ on Muthoot Finance with a price target of ₹4,750, citing attractive risk-reward and reasonable valuations. Motilal Oswal Financial Services maintained a ‘Neutral’ call while raising its target price to ₹3,800. Bernstein maintained an ‘Outperform’ call with a target of ₹3,400.

The stock reaction in one update includes shares jumping nearly 10% to a fresh 52-week high on November 14 after the Q2 FY26 performance. Another market datapoint notes shares closing 1.17% higher at ₹2,370.15 on the NSE, while another snapshot shows the stock at ₹2,387.35, down ₹29.10 (-1.20%) from the previous close.

Key facts at a glance

What to watch next

A key operational marker will be how lenders position branch additions ahead of the February 2026 regulatory effective date. Investors will also track whether the higher FY26 growth guidance of 30% to 35% sustains as gold prices and unsecured-credit tightening continue to influence borrower behaviour. Another area to watch is Muthoot’s stated intent to keep non-gold loan exposure at about 12% to 15% of consolidated loan AUM while scaling personal, home, and business loans. Finally, the execution of the ₹35,000 crore NCD plan and the ₹500 crore infusion into Muthoot Money will be important disclosures as funding and growth plans progress.