Gold financing stocks extend gains, surge up to 16%

Extending their rally for the second consecutive day, shares of gold-financing firms Muthoot Finance and Manappuram Finance today surged up to 16 per cent after the RBI revised loan-to-value policy for NBFCs.
Shares of Manappuram Finance closed at Rs 21, up 15.70 per cent on the BSE. In intra-day trade, the stock touched its upper circuit limit of Rs 21.75, up 19.83 per cent.
Muthoot Finance's scrip shot up by 7.32 per cent to close at Rs 138.55.
In the previous sessions, shares of these two firms surged up to 20 per cent.
"...It has been decided to raise the LTV (Loan-To-Value) ratio to up to 75 per cent for loans against the collateral of gold jewellery from the present limit of 60 per cent with immediate effect," the RBI had said on Wednesday.

This, it said, has been done in view of the moderation in the growth of gold loan portfolios of Non-Banking Financial Companies (NBFCs) in the recent past.

The RBI further said the value of the jewellery for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of the gold content therein and no other cost elements (like making charges) should be added thereto.
"The development is positive for gold loan companies like Muthoot Finance and Manappuram Finance, as earlier norm of 60 per cent LTV had resulted in moderation of loan books for these companies," Angel Broking said in a report.

"It also appears that regulator is now comfortable with the loan books of these NBFCs and want them to play an active role in monetisation of idle gold in the country," the report said.