Muthoot Finance shares dropped over 11% to Rs 3,610 on February 13, a day after the company announced its December quarter results and brokerages released detailed assessments.
The gold loan non-banking financial company reported a 94.9% year-on-year rise in net profit for the third quarter of FY2025-26. Net profit stood at Rs 2,656 crore compared with Rs 1,363 crore in the same quarter last year. Net interest income climbed 64% year-on-year to Rs 4,467 crore from Rs 2,721 crore a year earlier.
As on December 31, 2025, consolidated loan assets under management were Rs 1,64,720 crore, up 48% from Rs 1,11,308 crore at the end of December 2024. Following the results, Nuvama Institutional Equities and Motilal Oswal retained their ratings in reports dated February 12, 2026. Here is a detailed look at their findings.
1) Nuvama on Muthoot Finance: ‘Buy’
Nuvama Institutional Equities has maintained a ‘Buy’ rating on Muthoot Finance with a revised target price of Rs 4,700. Based on Rs 3,610, this suggests an upside of about 30.2%.
In its February 12 report, Nuvama said, “Muthoot reported a big beat on AUM growth, NIM and credit cost yet again.” It noted that gold assets under management expanded 12% sequentially and 50% year-on-year, while net interest margin improved by 11 basis points over the previous quarter. The brokerage also pointed out that the gross Stage 3 ratio fell by 67 basis points.
The firm stated that net interest income increased 12% quarter-on-quarter and 64% year-on-year. Pre-provision operating profit rose 79% year-on-year, and profit after tax climbed 95% year-on-year and 13% sequentially. Credit cost eased to 32 basis points from 36 basis points in the preceding quarter.
Nuvama further observed that income from recoveries of non-performing accounts, asset reconstruction companies and auctions amounted to Rs 624 crore during the quarter compared with Rs 300 crore in the previous period. It added, “Given strong and better-than-peers earnings and Muthoot’s ability to shield loan yields from rising competition, we maintain ‘Buy’.
2) Nuvama on earnings drivers: Role of recoveries
Nuvama explained that the quarter’s yield improvement was partly aided by collections from older stressed accounts. It said roughly Rs 500 crore came from recovered non-performing loans, Rs 100 crore from auction proceeds and about Rs 24 crore from asset reconstruction company-related income.
The brokerage clarified that interest on such recovered accounts is recognised when cash is received. It added that this type of income depends on the pace and timing of recoveries and may vary across reporting periods.
It also stated that management expects steady-state loan yields to remain in the 18.5% to 19% range. The brokerage noted that guidance for 30–35% assets under management growth for FY2025-26 remains unchanged.
Nuvama’s report emphasised that strong expansion in the gold loan book and improvement in asset quality were key positives for the quarter.
3) Motilal Oswal on Muthoot Finance: ‘Neutral’
Motilal Oswal Financial Services has retained a ‘Neutral’ rating on Muthoot Finance with a target price of Rs 4,500. At Rs 3,610, this translates into a potential upside of about 24.7%.
In its February 12 update, Motilal Oswal said the company delivered “stellar gold loan growth of 50% YoY; cal. NIM stable QoQ.” It reported that gold loan assets under management rose 50% year-on-year to Rs 1,39,700 crore.
The brokerage said profit after tax increased 95% year-on-year and 13% sequentially to Rs 2,660 crore, exceeding its expectations. However, it mentioned that the quarter included one-off interest income of around Rs 650–750 crore from legacy non-performing accounts, Rs 120 crore from auctions and Rs 40 crore from asset reconstruction company sales.
Motilal Oswal also noted that gold tonnage declined about 2% quarter-on-quarter to 205 tonnes, and loan-to-value moderated to around 55.8% compared with about 56.5% earlier.
4) Asset quality improvement: Stage 3 ratio falls sharply
Nuvama reported that gross Stage 3 loans reduced from Rs 2,977 crore in the previous quarter to Rs 2,324 crore in the December quarter. The Stage 3 ratio declined to 1.58% from 2.25%.
The brokerage stated that credit cost improved to 32 basis points. It also mentioned that the company provides fully for non-gold non-performing loans.
Motilal Oswal observed that spreads benefited from higher recoveries. It added that reported return on assets and return on equity remained strong during the period.
Both firms indicated that improvement in stressed assets was a significant positive in the December quarter performance.
Conclusion
Nuvama Institutional Equities sees an implied upside of about 30% to its target of Rs 4,700 and has kept its ‘Buy’ recommendation. Motilal Oswal Financial Services projects nearly 25% upside to Rs 4,500 while maintaining a ‘Neutral’ stance.
According to both reports, the company delivered strong growth in its gold loan book and better asset quality. At the same time, they pointed out that part of the earnings increase was supported by recoveries from older stressed accounts.