While most Indian lenders are facing one of the world’s biggest pile of bad loans, Muthoot Finance has almost all of its book backed by gold
An astounding rally in the shares of Muthoot Finance Ltd. has made the lender big enough to be added to the MSCI India Index, analysts say.
Shares of India’s largest cash-for-gold lender have surged 71% this year, the third-biggest gain on a gauge of the nation’s top 200 firms. The company is now valued at $7 billion, a size that may spur MSCI Inc. to include the stock in its gauge at the quarterly review due in August, according to Edelweiss Financial Services Ltd. and Target Investing.
While most Indian lenders are facing one of the world’s biggest pile of bad loans, Muthoot has almost all of its book backed by gold. With local prices of the metal at a record, small Indian households have been pawning ornaments with lenders like Muthoot to tide over the virus-induced cash crunch.
Muthoot’s net income has grown by about 50% year-on-year in three of the last four quarters, data compiled by Bloomberg show.
“Business is good as gold loans are picking up pace very quickly," said Sameer Kalra, an investment strategist at Target in Mumbai.
An MSCI spokeswoman didn’t have any immediate comment. If added, Muthoot will provide investors who track MSCI India Index another proxy to gold prices after the jewelery maker Titan Co.