Shares of Muthoot Finance fell more than 14 per cent in intra-day trading after the company reported weaker-than-expected financial results for the first quarter of FY27. Analysts attributed the decline in the stock to pressure on earnings caused by a sharp contraction in the company’s net interest margin (NIM).
The leading gold loan non-banking financial company (NBFC) posted lower-than-expected profit after tax for the April–June quarter, primarily due to a significant decline in lending yields. According to brokerage reports, the company’s NIM fell by nearly 300 basis points quarter-on-quarter, mainly because of lower interest rates on advances and the normalisation of loan renewals following exceptionally strong recoveries during FY26.
Management stated that the decline in yields reflected a combination of reduced lending rates and the return to more normal business conditions after an unusually strong previous financial year.
Brokerages expect loan growth to moderate in the coming quarters as demand for gold loans normalises following the sharp rise in gold prices witnessed over the past year. However, analysts believe margins could stabilise at around 11 per cent, supported by an expected portfolio yield of 18 to 18.5 per cent. Asset quality is also expected to remain stable, while the company is likely to maintain disciplined cost management.
DAM Capital maintained a ‘Neutral’ rating on the stock with a target price of ₹3,200, noting that while loan growth remained broadly in line with expectations, the sharp fall in yields significantly impacted quarterly earnings.
