Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AA+/Stable’ to Rs 12,000 crore non convertible debentures of Muthoot Finance Ltd (Muthoot Finance). The ratings on other debt instruments has been reaffirmed at 'Crisil AA+/Crisil PPMLD AA+/Stable/Crisil A1+'.

 

Crisil Ratings has withdrawn its rating on the redeemed Secured Redeemable Non-Convertible Debentures of Rs 1681 crore and Rs 500 crore of Long-Term Principal Protected Market Linked Debentures (see ‘Annexure - Details of Rating Withdrawn’ for details) at the client’s request and on receipt of requisite documentation. The withdrawal is in line with the Crisil Ratings’ policy on withdrawal of ratings.

 

The ratings continue to factor in Muthoot Finance’s demonstrated ability of profitably scaling up its core gold loan business while maintaining its strong financial risk profile. The rating also takes into consideration the company’s strong market position within the gold loan segment of India, bolstered by promoter experience. These strengths are partially offset by geographical concentration in operations and low market share in the non-gold loan segments and, asset quality challenges relating to these non-gold loan segments.

 

As on December 2025, the consolidated loan AUM grew by 48% YoY (%) and reached Rs 1,64,720 Crore. For fiscal 2025, the consolidated loan AUM grew by ~37% (Y-o-Y) thereby reaching Rs 1,22,181 crore as on March 31, 2025, from Rs 89,079 crore a year ago. Its flagship product segment (loan against gold jewellery) grew by ~45 % (Y-o-Y) to Rs 1,07,297 crore as on March 31, 2025, from Rs 74,172 crore a year ago. The non-gold loan segment remained stable Y-o-Y(%) at Rs 14,884  crore, as on March 31, 2025 from Rs14,906 crore in the previous fiscal.

 

In terms of consolidated loan segmental breakup, gold loans continued to account for maximum portion at around 90% as on December 31, 2025. The non-gold loan portfolio accounted for remaining 10% of the consolidated loan AUM, out of which, the microfinance business (Belstar Microfinance Ltd) (which is 2nd largest company of the group) accounts for 5 %, followed by housing finance (Muthoot Homefin) accounting for ~2%.

 

As far as portfolio quality is concerned, the delinquencies were mainly from the non-gold loan segment (primarily microfinance segment). The gross NPAs (90+ dpd) in microfinance segment stood at 4.93% as of December 31, 2025, as compared to 4.98% as of March 31, 2025 (1.82% as of March 31, 2024). The higher delinquencies in microfinance segment have been on account of several challenges faced by industry during last 3-4 quarters. Within home finance segment, the gross NPAs remained steady in the range of 1.2-2.3% during last 1-2 years (March 2024 till December 2025). 

 

Given majority of the loan portfolio has been secured and high yielding in nature, the profitability both in terms of consolidated and standalone remained high. During the nine months of fiscal 2026, the company’s return on managed assets (RoMA) of 6.1% (on consolidated basis), driven by high interest margins, high operational efficiency and low credit losses. The company’s RoMA has remained high in the range of 4.7-5.6% during last 2-3 years. Given this operational expertise in gold loan segment, the management is also expanding this product through its other subsidiaries. The gold loan portfolio within Belstar Microfinance stood at Rs ~71 crore as on December 31, 2025, while for Muthoot Money it stood at Rs 7,992 crore.

 

The company has also expanded its operations while maintaining a strong capital position, with a reported net worth of Rs 35,624 crore and gearing remained low at 3.9 times as of December 31, 2025 (consolidated). Also, its standalone tier I capital adequacy ratio stood at a comfortable 20.27%.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Muthoot Finance and its subsidiaries, including Muthoot Homefin India Limited [Muthoot Homefin], Muthoot Money Limited [Muthoot Money] and Belstar Microfinance Limited [Belstar].

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation

Key Rating Drivers - Strengths

Established track record and brand name in gold financing industry

Muthoot Finance has sustained its leadership position in the gold financing segment, supported by the long and established track record of 85 years of its promoter family. The group has a large operational base of over 7541 branches across India (with over 6007 branches offering gold loans), which has supported its leadership position among NBFCs carrying out gold loan business over the years. The group maintained consistent growth in gold loan business; The gold loan segment grew by ~45% (Y-o-Y) to Rs 1,07,297 crore from Rs 74,172 crore and the non-gold loan segment remained stable Y-o-Y  at Rs 14,884  crore from Rs 14,906  crore. For fiscal 2025, the consolidated loan AUM grew by ~37% (Y-o-Y) to Rs 1,22,180 crore from Rs 89,079 crore. As on December 31, 2025, the consolidated loan AUM stood at Rs 1,64,720 Crores and YoY(%) growth of 48%. The growth was also supported by appreciation in gold prices during the last 4-6 quarters and new disbursals getting aligned with the same. In terms of active borrowers and no. of loan accounts, it also showed steady increase; the active borrowers crossed 65.3 lakh mark as of December 31, 2025, from 56.7 lakh as of March 31, 2024. Similarly, the number of loan accounts also increased to 1.06 Crore as of December 31, 2025, from 87.4 lakh as of March 31, 2024. Muthoot Finance’s extensive branch network and client base, which is relatively more diverse in terms of geographies and is gradually improving further, should support the further strengthening of its competitive position over the medium term. Crisil Ratings overall believes that, while the company has taken substantial steps and diversified non-gold loan segments, its primary focus will continue to remain on gold loans over the medium term.

 

Strong capitalisation

Muthoot Finance’s capital position remains strong in relation to its scale and nature of operations, supported by its demonstrated ability to raise capital frequently and large accretions to networth. As on March 31, 2025, the company reported a consolidated networth of Rs 29,367 crore and a comfortable gearing of 3.4 times. As on December 31, 2025, the company reported a consolidated networth of Rs 35,624 Crore. The gearing has remained below 4 times for several years now. Overall capital adequacy ratios on a standalone basis have also remained comfortable over 20% over the last few years driven by stable growth in business and stood at 23.7% on March 31, 2025, and 20.27% as on December 31, 2025. Strong internal cash generation from the gold loan business will allow Muthoot Finance to prudently capitalize its subsidiaries and provide need-based liquidity support, apart from strengthening its standalone capital position. Even after factoring in leverage in the key subsidiaries, Crisil Ratings believes the consolidated gearing will remain below 5 times and capital adequacy ratio above 20% over the medium term.

 

Profitability among the best in the industry, expected to remain healthy

The company’s earnings profile has been healthy in the past and has improved further over the last few fiscals to outperform NBFCs and banks. For fiscal 2025 and fiscal 2024, the consolidated RoMA stood at 4.7% and 5.1%, respectively, and is expected to remain at similar level over the medium term. For the nine months of fiscal 2026, the consolidated RoMA (annualized) stood at 6.1%.  This superior profitability can be attributed to the company’s ability to generate high interest margins while keeping operating expenses and provisioning requirements low. In terms of asset quality as measured by annualised credit costs have also been under control. Stage III assets, which have remained below 3% on a steady state basis in the past and stood at 3.4% as on March 31, 2025, however reduced to 1.6% as of December 31, 2025. The consolidated credit costs(annualised) remained within 1.5% (0.7% of loan assets in nine month of FY2026) on account of low asset-side risk (security of gold, which is liquid and is in the lender’s possession) in the gold finance business primarily arising out of expected credit loss provision required as per accounting standards. The ultimate loss due to write offs have remained negligible on account of liquidation of security of gold. In the medium term, consolidated profitability is expected to remain healthy. As the group diversifies into other segments in the long run, asset quality and profitability of the non-gold businesses will remain monitorable

Key Rating Drivers - Weaknesses

Geographical concentration in operations and low market presence in non-gold businesses

Muthoot Finance’s operations have a degree of geographical concentration - South India accounting for about 57% of its branches as on December 31, 2025. However, from gold loan portfolio perspective, there has been a reduction in concentration in the South region accounting for 49% as of December 31, 2025, which was at 86% in fiscal 2007. Nevertheless, higher regional concentration renders the company to vulnerabilities of economic, social, and political disruptions in the region. Apart from continued focus on regional diversity, Muthoot Finance also diversified its product suite across microfinance, housing finance, vehicle finance and a few other segments. However, the share of non-gold loan segments in the group’s loan portfolio remains low given the gradual restoration of asset quality and lagged pick-up in growth across most segments except microfinance. Overall, non-gold loans saw a growth of ~ 9% (YTD ) to Rs 16,255  crore. Over the medium term, as the focus on these segments will remain low – high segmental concentration in loan AUM and revenue profile will remain a key monitorable.

 

Asset quality challenges associated with non-gold loan segments

Given the limited seasoning in the non-gold loan segments (excluding microfinance segment), the growth, asset quality and profitability in those segments are yet to stabilize. Within the housing finance segment, Muthoot Homefin operates in the affordable housing finance segment, catering to self-employed customers engaged in small business activities and thus, have a relatively weak credit risk profile because of the volatile nature of their income and employment in un-organised segments. The vehicle finance business (under Muthoot Money) hitherto was lending against commercial vehicles and equipment – majority of which are used/pre-owned vehicles has stopped fresh business due to  the asset quality issues post Covid and has been focusing  only on gold loan business.

 

Similarly, microfinance loans (under Belstar Microfinance), comprise loans given to individuals under the self-help group (SHG) mechanism. Its customers generally have below-average credit risk profiles with lack of access to formal credit. Such borrowers are typically farmers, tailors, cattle owners/traders, small vegetable vendors, teashop owners and dairy farmers. The incomes of these households could be volatile and dependent on the performance of the local economy. The gross NPAs (90+ dpd) in microfinance segment stood at 4.93% as of December 31, 2025, as compared to 4.98% as of March 31, 2025 (1.8% as of March 31, 2024).

 

The microfinance sector has witnessed various events over the years, including regulatory and legislative challenges, that have disrupted operations. These challenges underscore the vulnerability of the microfinance business model to external risks. While the sector has navigated these events, it remains susceptible to issues, including local elections, natural calamities and borrower protests, which may increase delinquencies for a while. Nevertheless, the company was able to manage its portfolio well without any significant impact on recoveries. However, MFIs remain vulnerable to socially sensitive factors and the macroeconomic scenario. Furthermore, the sector is regulated by multiple bodies which, from time to time, have been providing several directives to maintain credit discipline and avoid over indebtedness for borrowers.

 

Therefore, ability of the company to grow in these non-gold loan businesses while maintaining asset quality and profitability remains key rating sensitivity factor.

Liquidity Strong

The company’s standalone liquidity position remains strong with a liquidity balance of Rs 14971 crore as on January 31, 2026 (excluding un-utilized portion of existing term loans, un-utilized portion of Cash Credit and Working Capital Demand Loans). Liquidity cover for debt obligations arising over the following 2 months was at 1.23 times, without factoring in inflows from debt obligations which will get rolled over and incremental collections from loan repayments.. Over the last 4-5 quarters, Muthoot Finance has been maintaining about 5-8% of its balance sheet as liquidity balance. The company has also been able to roll over existing capital lines and also raise incremental funds at competitive rates over the last few quarters. Since April 2025, the company has raised around Rs.48,887 crore of funds from bank loans, non-convertible debentures and External Commercial Borrowings.

ESG Profile

Crisil Ratings believes that Muthoot Finance’ Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile. The ESG profile for financial sector entities typically factors in governance as a key differentiator. The sector has a reasonable social impact because of its substantial employee and customer base, and it can play a key role in promoting financial inclusion. While the sector does not have a direct adverse environmental impact, the lending decisions may have a bearing on environment.

 

Muthoot Finance has a continuous focus on strengthening various aspects of its ESG profile.

 

Muthoot Finance’s key ESG Highlights:

• MFL has revised its reporting on key environmental parameters by improving the data collection systems in fiscal 2025.
• Its energy consumption intensity stood at ~3.6 MWh per employee and the Scope 1 and 2 emissions intensity was at ~2591 kg CO2e per employee, in fiscal 2025, which was higher than the peer average
• MFL has set target to shift to 100% renewable energy in owned office buildings by fiscal 2030 (Share of renewable energy in overall mix stood at ~0.03% in fiscal 2025), incentivize employees using electric vehicles by creating incentive programs by fiscal 2030 and integrate water-efficient technologies in all existing buildings by fiscal 2025
• The share of women employees in the total workforce improved by ~8 percentage points to ~26% in fiscal 2025 from ~18% in fiscal 2022, which was higher than the peers. However, the attrition rate stood at ~26%, in fiscal 2025
• The company’s governance structure is characterized by half of its board comprising of independent directors with segregation in chairperson and executive positions, a board level ESG committee to oversee company’s ESG related matters, and presence of a dedicated investor grievance redressal mechanism, and extensive disclosures

 

There is growing importance of ESG among investors and lenders. Muthoot Finance’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given the sizable share of market borrowings in its overall debt and access to both domestic and foreign capital markets

Outlook Stable

Crisil Ratings believes Muthoot Finance will sustain its strong capitalisation and healthy profitability. Asset quality in the gold loan business, which accounts for a majority of the loan AUM, will remain sound, supported by increased frequency of interest collections and the highly liquid nature of the underlying security (gold jewelry), which should keep credit losses low. For non-gold loan segments, maintenance of asset quality and profitability alongside growth remains monitorable.

Rating sensitivity factors

Upward factors

• Continued strong market position in the gold finance business with increasing diversity in Loan AUM and geographical reach
• Sustenance of profitability with RoMA above 5% on a steady state basis, while improving asset quality

 

Downward factors

• Significant and sustained deterioration in asset quality of non-gold businesses affecting earnings
• Moderation in capital position, with tier I capital adequacy ratio declining below 15%.

About the Company

Muthoot Finance, an NBFC, was originally set up as a private limited company in 1997 and was reconstituted as a public limited company in November 2008. It provides finance against used household gold jewellery. The promoter family has been in this business for over eight decades since 1939. During the initial days, the business was carried out under Muthoot Bankers, a partnership firm. Muthoot Finance is the flagship company of the Muthoot group (promoter of Muthoot Finance), which is also in the hospitality, healthcare, education, information technology, foreign exchange, insurance distribution, and money transfer businesses

Key Financial Indicators: (Standalone)

As on/ for the period ended		Nine months fiscal 2026 /Dec-25	Fiscal 2025 / Mar-25	Fiscal 2024 / Mar-24
Total managed assets	Rs crore	165,584	121,248	85,028
Total income	Rs crore	19,444	17,156	12,694
Profit after tax	Rs crore	7,048	5,200	4,050
Gross NPA	%	1.6	3.4	3.3
Gearing	Times	3.7	3.2	2.4
Return on managed assets	%	6.6*	5.1	5.1

*on an annualised basis

 

Key Financial Indicators (consolidated)

As on/ for the period ended		Nine months fiscal 2026 /Dec-25	Fiscal 2025 / Mar-25	Fiscal 2024 / Mar-24
Total managed assets	Rs crore	180,234	132860	96,469
Total income	Rs crore	22,057	20,324	15,163
Profit after tax	Rs crore	7,209	5,352	4,468
Gearing	Times	3.9	3.4	2.7
Return on managed assets	%	6.1*	4.7	5.1

*on an annualised basis

 

Any other information: Not Applicable