Muthoot Finance · risk themes across the available quarters.
Bear-case history
Multiple NBFCs are now aggressively targeting gold loans, forcing Muthoot to reduce rates. Analysts questioned whether further compression could impact profitability, especially if intensity increases over the next 2-3 quarters.
Profit declined 17% QoQ to ₹2,825 crore despite 5% sequential AUM growth, raising questions about whether FY27 will see meaningful bottom-line expansion. Management deflected by noting FY26 Q4 had extraordinary income from recoveries and renewals.
The transition to new LTV products (75-80-85%) required significant staff and customer retraining. Stage 1/Stage 2 classification may change as customers migrate to monthly interest payment structures, affecting NPA recognition patterns.
Cost of funds rose approximately 70bps QoQ and management indicated no near-term reduction expected, with further increases possible depending on RBI policy. This could compress margins if yield remains constrained at 18%.