Amid coronavirus lockdown, gold finance companies may be less impacted

Backing of a liquid collateral and pricing power augur well

At a time when the country is reeling from the impact of the global outbreak of coronavirus (Covid-19), non-banking financial company (NBFC) stocks were among the worst hit. Their performance is expected to be hit due to stress across sectors. While these concerns are justified, gold finance companies — Manappuram Finance and Muthoot Finance — may be less impacted.

There is no doubt that both financiers have also faced operational disruption due to the lockdown; they have shut their branches. There could be some asset quality pressure as well. However, the highly liquid collateral (gold)-backed loans with typical asset tenure of