‘Stigma around gold loans as last-resort funding is fading’: Shaji Varghese, CEO of Muthoot FinCorp

What drove the 138% rise in disbursements during FY26?

What we see today is the result of the internal reengineering we have done over the last 3-4 years. We built a strong outbound team to source gold loans, entered into multiple partnerships for gold loan leads, and created a digital platform. We also added nearly 300 branches. The growth (in disbursements) is the result of internal capacity building, technology investments, partnerships and business rigour.

There were also sectoral tailwinds. The regulation around gold lending is now very clear, gold prices are elevated, and most importantly, the stigma around gold loans being a last-resort borrowing product is no longer there. Product features are also far superior compared to short-term personal or unsecured loans. The entry fee for a gold loan is only ₹20, there are no prepayment charges, and interest is charged only for the actual number of days the loan is used. We are able to match the trade cycles of consumers and retailers, which is helping drive growth.

Is the current pace of AUM growth sustainable?

Last year was exceptional. Our standalone AUM grew 75% to ₹56,185 crore. Part of the growth came from higher gold prices, but there are other structural growth factors that remain intact. When families need credit and the supply of unsecured loans slows down, gold loans become a strong alternative for them. If banks cut down MSME exposure or unsecured lending, customers will still need credit and may increasingly move towards secured borrowing like gold loans or mortgage-backed loans. That said, we believe there is a structural and secular shift towards gold loans, and this trend is likely to stay for the long term.

How vulnerable is the business to fluctuations in gold prices?

Our loan-to-value (LTV) ratio stood at only 57.58% as of March 2026. Around 15%-20% of the customer’s cost is acquisition cost in the form of taxes, making charges and other expenses. Import duty on gold has also increased recently, pushing up acquisition costs further. Our LTV is calculated on bullion prices and not on replacement cost, so for customers the effective LTV is even lower. Also, gold loans operate on a daily repayment cycle, with loans getting closed every day. Unless there is a sudden 50%-60% correction in gold prices in a single day, the impact is unlikely to be significant. The average tenure of our loans is only five months. The shorter tenure and lower LTV help cushion the impact of short-term price corrections.

Why has the company decided to pursue an IPO now?

Our Board has approved a ₹4,000-crore fundraise through an IPO. It will purely be growth capital, with no offer-for-sale by existing shareholders. We are seeing strong growth momentum, and the fundraise is aimed at sustaining that growth. We also believe this is the right time for the company to get listed. We are among the top quartile in terms of asset size and are still unlisted. We have a sizable asset, secured lending book, strong growth momentum and healthy internal accruals. So, this IPO is essentially preparation for future growth. We cannot give a specific IPO timeline because there are multiple approval processes involved. Now that we have Board approval, we will formally engage merchant bankers and legal advisors and formally take the IPO process forward.

We have also taken umbrella approval from the Board to raise ₹4,000 crore through non-convertible debentures. These will be issued during the year depending on our funding requirements.