MUTHOOTFIN - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.0

• 📈 Revenue Growth: Quarterly PAT improved from ₹2,046 Cr to ₹2,345 Cr (+87.4% YoY), strong growth momentum
• 💰 Profit Margins: Healthy, ROE at 19.7% and ROCE at 13.4%
• ⚖️ Debt Ratio: Debt-to-equity at 3.52, high leverage typical of NBFCs
• 💵 Cash Flows: EPS of ₹181, robust earnings base
• 📊 ROE/ROCE: Efficient capital use, above industry averages
• 📉 Valuation: P/E 20.9 vs Industry PE 21.2, fairly valued
• 📚 Book Value: ₹793, P/B ~4.77
• 📈 PEG Ratio: 2.19, indicates valuation slightly stretched relative to growth
• 🏢 Business Model: Leading NBFC specializing in gold loans, with diversification into housing finance and microfinance
• 🛡️ Competitive Advantage: Strong brand recognition, extensive branch network, and leadership in gold loan segment

Positive

• ✅ Strong quarterly profit growth (+87.4% YoY)
• ✅ EPS of ₹181 supports valuation strength
• ✅ FII holdings increased (+0.74%)
• ✅ Leadership in gold loan market with strong brand presence

Limitation

• ⚠️ High debt-to-equity ratio (3.52), leverage risk
• ⚠️ PEG ratio at 2.19 indicates stretched valuation
• ⚠️ DII holdings reduced (-0.84%)
• ⚠️ Dividend yield at 0.69%, modest shareholder returns

Company Negative News

• 📉 Reduction in domestic institutional investor holdings
• 📉 High leverage raises concerns about asset quality in downturns

Company Positive News

• 🌍 Strong profit growth in latest quarter
• 💡 Expansion into housing finance and microfinance segments
• 📈 Increased foreign institutional investor confidence

Industry

• 💹 Industry PE at 21.2, Muthoot trades fairly in line
• 📈 NBFC sector benefits from rural credit demand and financial inclusion initiatives

Conclusion

Muthoot Finance shows strong fundamentals with robust profit growth, high ROE, and leadership in the gold loan segment. Valuation is fair relative to peers, though leverage remains a key risk. Entry zone is attractive around ₹3,500–3,650 (near DMA 50 support). Long-term holding is favorable given strong brand equity, diversified lending portfolio, and consistent earnings growth, but investors should monitor debt levels closely.

Would you like me to extend this into a peer benchmarking overlay comparing Muthoot Finance with Manappuram Finance and Shriram Finance, or should we run a sector rotation scan to identify stronger compounding opportunities across NBFC and financial services plays?