Brokerage firm JPMorgan has initiated coverage on gold financing companies - Manappuram Finance Ltd., Muthoot Finance Ltd., and IIFL Finance Ltd., in its note on Friday, August 21. All three initiations have come with an "overweight" rating. JPMorgan has a price target of ₹750 on IIFL Finance, ₹3,400 on Muthoot Finance, and ₹395 on Manappuram Finance respectively.
IIFL Finance's price target implies an upside potential of 18%, while those for Muthoot and Manappuram indicate an upside potential of 14% and 13% respectively. Here's what JPMorgan said in its rationale behind being bullish on the three gold financiers: IIFL Finance: Preferred pick among Manappuram & Muthoot.

The company is in the early stages of a turnaround and should re-rate due to higher profitability. Muthoot Finance: Underperformance on a year-to-date basis offers a compelling entry point. The stock is down 22% so far this year. Manappuram Finance: Turnaround has just begin with the June quarter result being a confirmation of the same.
JPMorgan wrote in its note that Gold Loans in India are secured retail credit with robust growth seen in the past, adding that the next phase of growth will be structural and not cyclical. The share of gold loans in system credit could reach 10% over the next five years from 5% in financial year 2026, according to JPMorgan, as a multi-year cultural shift leads to gold evolving from a family heirloom to a monetizable asset.

The JPMorgan note stated that the gold loan penetration in India remains low despite the recent surge with only 11% of the bottom-60% household gold collateralized. The brokerage attributed the changing borrower preference to rising financial literacy of borrowers and a reduced risk appetite among lenders.
Although competition is intensifying with the entry of more players such as Poonawalla and Aditya Birla Capital, the higher barriers to entry such as distribution and branch network should protect the profitability of the incumbents, the brokerage said.

The commodities team of JPMorgan expects Gold prices to surge back to $5,000 an ounce by the end of 2027, which bodes well for these NBFCs, given the high correlation of 90% to 95% between gold and stock prices, excluding IIFL Finance, the note said further.
Shares of Manappuram Finance has outperformed Muthoot this year, gaining 11% so far, compared to Muthoot's 22% drop, while shares of IIFL Finance are up only 2% so far on a year-to-date basis.