Muthoot Vs Manappuram: Why Jefferies upgrades one gold loan stock, cuts rating for the other?

That brings two major names into focus – Muthoot Finance and Manappuram Finance.

Both operate in the gold loan space. Both are seeing strong gold-linked growth. The global brokerage house Jefferies has given its outlook on both the stocks. The brokerage has taken very different calls on the two gold loan stocks.

So, which one does the brokerage prefer? Let’s take a look – 

Muthoot Finance: Why Jefferies turned cautious

Jefferies has downgraded Muthoot Finance to ‘Hold’ from ‘Buy’ and sharply reduced its target price to Rs 3,300 from Rs 4,350. Based on the brokerage’s estimates, this implies only around 6% upside from the current market price.

The concern is not about growth disappearing. It is about profitability coming under pressure.

Muthoot Finance’s June-quarter profit after tax grew 25% year-on-year to Rs 2,550 crore. However, it came in 18% below Jefferies’ estimate.

The brokerage said net interest margins, or NIMs, fell sharply as gold loan yields normalised. Competition and a shift towards lower-rate loan slabs also weighed on margins.

Jefferies noted that “Assets Under Management (AUM) grew 43% YoY (6% QoQ) led by higher Loan-to-Value ratio.”

Muthoot’s standalone AUM reached Rs 1.72 lakh crore, with gold loan AUM rising 44% year-on-year. However, NIM fell 300 basis points quarter-on-quarter to 10.4%.

The brokerage expects competition and range-bound gold prices to weigh on earnings growth.

It expects AUM growth of around 15% in FY27, with profit growth at just 5%.

Jefferies therefore said, “Downgrade to ‘Hold’ with a revised price target of Rs 3,300 (Rs 4,350).”

Jefferies on Manappuram Finance: Maintains a ‘Buy’ rating

Jefferies has maintained its ‘Buy’ rating and raised the target price to Rs 430 from Rs 360. That represents an upside of around 17%.

The reason is stronger growth combined with improving margins.

Manappuram’s June-quarter profit after tax came in at Rs 580 crore, 15% above Jefferies’ estimate. Consolidated AUM rose 9% quarter-on-quarter and 57% year-on-year to Rs 69,600 crore.

Gold loan AUM was the biggest driver, rising 12% quarter-on-quarter and 98% year-on-year.

The brokerage highlighted “Healthy customer additions & branch expansions” as key growth drivers.

Manappuram plans to add around 500 gold loan branches. Jefferies expects this expansion, along with customer growth, to support gold loan growth of around 25% in financial year 2027.

Margins are also showing improvement. Consolidated NIM rose 65 basis points quarter-on-quarter to 10.3%.

Credit costs have also improved. Jefferies expects them to decline further in financial year 2027.

The brokerage has therefore raised its earnings estimates and said, “reiterate Buy: We factor stronger AUM growth & better NIMs.”

Muthoot vs Manappuram: Share price performance

Which gold loan stock is Jefferies betting on?

Muthoot Finance remains a strong gold finance franchise, but Jefferies believes near-term earnings growth could remain muted.

Manappuram, meanwhile, offers a more favourable earnings trajectory. Jefferies sees stronger AUM growth, improving margins and falling credit costs supporting the stock.

And with gold prices still commanding attention, the bigger question for investors may be whether stronger gold prices alone are enough to drive these stocks higher. 

Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.