High gold prices augers well for gold lenders, but Q3 shows contrasting results for these two firms

Gold prices have surged to an all-time high, benefiting gold loan financiers as economic pressures push more people to pledge their gold for liquidity.

In financial terms, gold lenders act as the "lender of last resort."

However, Q3FY25 has brought contrasting outcomes for two major players in the gold financing space—Muthoot Finance and Manappuram Finance.

Diverging gold tonnage trends

Gold prices per gram rose 20.4% year-on-year (YoY) and 1.3% quarter-on-quarter (QoQ). Despite this, the gold tonnage trends of Muthoot and Manappuram tell different stories.

Muthoot Finance’s gold tonnage reached a record high of 202 tonnes, while Manappuram Finance saw its lowest tonnage in 32 quarters or more.

Customer base and loan growth

Muthoot Finance’s customer base grew 12.5% YoY and 1.8% QoQ, reaching 0.62 crore. Meanwhile, Manappuram Finance saw a 4% YoY rise in its customer base, but a 2.26% decline QoQ to 0.26 crore.

Average ticket size and gold AUM growth

Muthoot Finance's average ticket size in gold loans grew by 19.4% YoY and 6% QoQ. Manappuram Finance reported a 13.5% YoY and 2.9% QoQ increase.

The growth in average ticket size is crucial, as gold loans are high-yield products.

Gold AUM trends also diverged sharply.

Muthoot Finance saw its gold loans grow by 34.3% YoY and 7.9% QoQ, while Manappuram Finance recorded 18.05% YoY growth but only a marginal 0.6% increase QoQ.

Market outlook

The gold loan business has performed well in Q3FY25 compared to Q2FY25 for many lenders, including Muthoot Finance and IIFL Finance. However, Manappuram Finance’s struggles remain unclear.

The company’s declining gold tonnage and weak QoQ growth raise questions about its lending strategy in a booming gold market.