Muthoot Finance Hits New High on 87% Q2 Profit Jump

Introduction

Shares of Muthoot Finance hit a new high of ₹3,997.95 on Wednesday, gaining 2 percent in an otherwise subdued market. This surge follows the company's announcement of a stellar performance in the second quarter of the financial year 2025-26. The gold finance company's stock has demonstrated significant outperformance, rising 50% in the last five months and a remarkable 84% over the past year, far exceeding the BSE Sensex's 8% gain during the same period. The strong financial results and an upgraded growth forecast have reinforced investor confidence in the non-banking financial company (NBFC).

Stellar Q2 Financial Performance

Muthoot Finance reported an 87% year-on-year (YoY) increase in its consolidated net profit, which stood at ₹2,345 crore for the quarter ending September 30, 2025. This is a substantial rise from the ₹1,251 crore profit recorded in the same quarter of the previous fiscal year. On a sequential basis, the profit grew by 14.6%. For the first half of FY26, the company's consolidated profit reached ₹4,386 crore, a 74% jump compared to the corresponding period last year. This robust profitability was driven by strong lending activity and growth in its core business.

Record Growth in Assets Under Management

The company achieved its highest-ever consolidated loan assets under management (AUM), reaching ₹1.48 trillion as of September 30, 2025. This represents a 42% YoY growth. The standalone loan AUM also saw a significant increase, rising to ₹1.32 trillion, up 47% YoY. The core gold loan business was the primary driver of this expansion, with gold loan AUM reaching a historic level of ₹1,24,918 crore. The company's gold holdings increased to 209 tonnes from 199 tonnes a year ago, reflecting the increased business volume.

Key Financial Highlights for Q2 FY26

To provide a clear overview of the company's performance, the key financial metrics for the second quarter are summarized below.

Upgraded Guidance and Management Outlook

Following the strong performance, the management of Muthoot Finance has upgraded its gold loan growth guidance for FY26 from 15% to a more ambitious 30-35%. Managing Director George Alexander Muthoot attributed this revision to several favorable factors, including supportive regulatory changes from the Reserve Bank of India (RBI) for the gold loan sector, rising gold prices, and tighter norms for unsecured credit, which are expected to channel more demand towards gold-backed loans. The company also plans to continue expanding its non-gold loan portfolio, including personal, home, and business loans, while maintaining its share at 12-15% of the consolidated AUM.

Strategic Initiatives and Fundraising

To support its growth trajectory, Muthoot Finance's board has approved a plan to raise ₹35,000 crore by issuing redeemable Non-Convertible Debentures (NCDs) through private placement in multiple tranches. This fundraising initiative is aimed at providing the necessary liquidity to scale its lending operations. Additionally, the company received a long-term issuer rating upgrade from Fitch Ratings, from ‘BB’ to ‘BB+’ with a stable outlook, further strengthening its financial credibility in the market.

Analyst Commentary Remains Positive

Several brokerage firms have responded positively to Muthoot Finance's Q2 results, reiterating bullish views and raising their price targets. Kotak Institutional Equities anticipates strong loan book growth to continue in the third quarter. Motilal Oswal Financial Services, while maintaining a 'Neutral' rating, increased its target price to ₹3,800, citing strong loan growth, improved asset quality, and expanded margins. The firm raised its FY26/FY27 earnings per share (EPS) estimates by approximately 10%. Similarly, Bernstein maintained its 'Outperform' rating and raised its target price to ₹3,400, while CLSA increased its target to ₹4,000, describing the quarter's performance as a 'master blaster'.

Market Impact and Future Prospects

The combination of record earnings, a positive industry environment, and a clear growth strategy has propelled Muthoot Finance's stock to new heights. The tightening of unsecured lending has created a favorable tailwind for secured lenders, and as a market leader, Muthoot Finance is well-positioned to capitalize on this shift. The company's focus on expanding its branch network and customer base, coupled with its strategic fundraising plans, provides a solid foundation for sustained growth through the remainder of FY26 and beyond.