I think there a few things to remember here:
- The differential in interest rates has existed for a while this is not new despite that gold NBFCs were able to grow at 15-17% CAGR over the last few years (ignoring the low base post 2013-14) This was mostly because people could walk in an NBFC and get a loan in 10-12 mins vs 30-40 mins in rural banks (which is the target audience for Muthoot)
- The LTV change was the biggest benefit for banks in a long time! Gold loans under 1lac count as priority sector lending and have a risk cover of 50% according to RBI so there was a lot of reason for banks to push gold loans they just weren’t able to dislodge the strength of the NBFC pace. Will this lead to a shift in customer behaviour over a long term is something you can argue about
My 2 cents is that this is a very cheap valuation for a company that is generating incredible return on its assets and can be a great turn around story for a medium term
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