Muthoot Finance Ltd Management Discussions

The global economy witnessed stable growth, expanding by 3.3% in 2024, despite geopolitical tensions and structural transitions. Among advanced economies, the US led with 2.8% growth, buoyed by strong consumer spending and labour market resilience. The Euro area grew modestly by 0.8%, reflecting efforts to stabilise energy markets and support domestic demand. Emerging markets expanded by 4.2%, driven by robust growth in India, Indonesia, and Vietnam, while China posted 4.6% growth amid structural adjustments. Global headline inflation eased to 4.2%, providing central banks some space to recalibrate monetary policy.

Though new US tariff measures and countermeasures introduced in early 2025 heightened trade policy uncertainty, 2024 underscored the resilience of global economic fundamentals and the need for adaptive, forward-looking policy frameworks.

Source: OECD Economic Outlook, June 2025.

The global economic outlook for 2025 suggests a period of moderation, shaped by ongoing uncertainty related to trade and tariffs, evolving financial conditions, and shifts in business and consumer behaviour. Global GDP growth is expected to moderate from 3.3% in 2024 to 2.9% in both 2025 and 2026, with the most notable slowdowns in the US, China, and parts of North America. Inflation is projected to decline gradually across many economies, supported by easing supply chain pressures and stable commodity prices.

Investment trends show steady progress, though housing and public infrastructure development continue to require focused attention in several countries. While trade tensions and policy shifts remain factors to watch, opportunities exist for greater collaboration and dialogue to enhance trade flows and build resilience. Strengthened fiscal frameworks, structural reforms, and supportive monetary policies could further underpin medium-term growth and help address long-term challenges such as climate adaptation and demographic shifts.

https://www.oecd.org/en/publications/oecd-economic-outlook-volume-2025-issue-1Rs83363382-en.html

https://www.morganstanley.com/insights/articles/economic-outlook-midyear-2025

Indias economy has demonstrated impressive strength and resilience over the past decade. In FY 2024-25, real GDP expanded by 6.5%, reflecting steady momentum supported by rising incomes and a strong domestic consumption base. The services sector remained the largest contributor, accounting for around 55% of Gross Value Added and providing employment to nearly 30% of the workforce. Private consumption grew by 7.3%, reaching its highest share of GDP since FY 2002-03, underpinned by improving rural demand.

On the external front, total exports grew to $825 billion, driven by sectors such as engineering goods, electronics, and pharmaceuticals. Services exports more than doubled over the past decade, highlighting Indias growing integration into the global economy. Policy reforms and infrastructure investments continue to support this robust trajectory.

Indias economic outlook remains largely steady, with GDP growth projected at 6.4% for FY 2025-26, slightly below the 6.5% recorded in FY 2024-25, the slowest pace in four years. Growth is expected to pick up modestly to 6.7% in FY 2026-27, supported by continued government capital expenditure and resilient domestic demand. While private sector investment and job creation remain a challenge, strong fundamentals and policy support, including recent interest rate cuts by the Reserve Bank of India, are expected to bolster momentum.

Risks remain from global uncertainties and stalled trade negotiations, but India continues to be the worlds fastest-growing major economy, on track to become the third largest by 2030 with a projected GDP of $7.3 trillion. Sustained reforms, demographic strengths, and expanding global trade ties are set to underpin Indias rise as a key driver of global growth, even as policymakers navigate near-term challenges and evolving global dynamics.

https://www.pib.gov.in/PressNoteDetails aspx?NoteId=154660&ModuleId=3#:~:text=In%20 2024%E2%80%9325%20alone%2C%20 nominal,estimated%20at%2012%25%20for%20FY26.

https://www.reuters.com/world/india/indias-economy-hold-top-spot-growth-underlying-weaknesses-remain-2025-06-27/

In FY 2024-25, Indias financial services sector faced multiple headwinds, as economic growth slowed, inflation and interest rates remained elevated, and liquidity in the system remained tight for most parts of the year. These together weighed on credit growth. Credit growth moderated but remained steady, while deposit growth lagged, leading to higher loan-to-deposit ratios. However, both banks and NBFCs witnessed robust balance sheets, with improving asset quality and Return on Assets The RBI stepped in proactively to ease liquidity constraints by firing on all cylinders. With inflation eventually coming closer to the central banks comfort zone, the RBI cut its policy rate by 25 bps in February 2025, with an accommodative stance. It was the first easing since the pandemic. Meanwhile, the central bank announced regulatory measures to cool off unsecured lending, as the segment started showing increased stress.

Banking without barriers: No-frills Jan Dhan accounts, Aadhaar-based identification, and mobile devices have collectively brought millions into the formal financial fold, enabling seamless and direct delivery of subsidies.

Formalisation of the economy: With JAM and digital payments, informal savings and transactions are moving into regulated channels, improving transparency and expanding access to credit, insurance, and pensions.

Fin-tech driven credit expansion: FinTech NBFCs have played a critical role in extending formal credit, disbursing record volumes of personal loans in FY 2024-25, particularly to underserved segments.

Institutional and regulatory support: Policies such as priority-sector lending, Self-Regulatory Organisation (SRO) regulation, and inclusion mandates support outreach to self-help groups, microfinance, and rural borrowers, strengthening trust and access.

https://www.pwc.in/assets/pdfs/viksit-banking-roadmap-indian-banking-sector-2047.pdf

In FY 2024-25, Indias NBFC sector showed resilience amid moderating credit growth. Overall credit grew by 13-15%, compared to 17% in previous years, with total NBFC credit crossing Rs52 trillion by December 2024 and set to exceed Rs60 trillion by FY 2025-26. Retail loans, the key growth driver, expanded by 16-18%, but faced rising stress in unsecured segments, such as microfinance and personal loans.

Despite regulatory tightening and elevated delinquencies in unsecured portfolios, NBFCs maintained strong capital positions and healthy earnings, cushioning sectoral risks. Funding conditions improved with increased external commercial borrowings and robust debt issuances. While moderate loan growth and rising credit costs may pressure margins, sector liquidity and capital profiles remain stable.

Competitive pressures and regulatory changes, including co-lending norms and gold loan guidelines, are expected to shape the sector further, but the long-term outlook remains steady.

https://www.icra.in/CommonService/OpenMediaS3?Key=4a11aca3-1a1d-4e46-916e-2697687f90ed#:~:text=Growth%20in%20 this%20segment%20is,60%20trillion%20in%20FY2026.

• RBI reversed the earlier 25 percentage point increase in risk weights on bank exposures to NBFCs, easing funding costs for the sector.

• The RBI advised NBFCs to curb perpetual credit lines, citing risks of loan evergreening and potential systemic instability.

• The RBI issued a framework for recognising Self-Regulatory Organisations (SROs) in the Account Aggregator ecosystem, detailing governance, eligibility, and oversight norms.

• Directions on co-lending outlined blended rate rules, borrower-level NPA tagging, fee disclosures, and Default Loss Guarantee (DLG) caps.

• Norms on non-fund-based credit facilities capped guarantees at 5% of assets with conditions on unsecured share and tenor.

• Guidelines on lending against gold collateral set a 75-85% loan-to-value (LTV) cap, including interest accrued, mandated standardised valuation, and introduced stricter audit and conduct norms.

The gold market reached new milestones in 2024, with global demand hitting record highs across sectors. Jewellery remained the largest segment, accounting for 44% of demand (2,012 tonnes), though volumes declined 11% due to rising prices, which averaged $2,386/oz (up 23% from 2023). Despite lower volumes, the total jewellery market value rose 9% to $144 billion, as consumers favoured higher-value pieces.

Investment demand surged 25% to 1,180 tonnes, driven by inflation, geopolitical risks, and renewed ETF interest, pushing the notional value of investor gold holdings to $5 trillion. Technology demand grew 7% to 321 tonnes, spurred by growth in AI, 5G, and green energy sectors.

Central banks purchased over 1,000 tonnes for the third straight year, cementing golds role as a stable reserve asset.

Gold holds a central place in Indian households, serving as a key pillar of wealth and savings. However, shifting consumer behaviours and increasing global influences are driving changes in how gold is valued and used. Indias gold market in 2025 has been defined by record-high prices, evolving consumer behaviour, and notable shifts in investment patterns. Domestic gold prices have surged over 30% year-to-date, reaching Rs98,732 per 10g, with the broader Indian gold market estimated at over $60 billion annually. Amid elevated prices, many buyers are opting to exchange old jewellery rather than make fresh purchases, while wedding-related demand continues to anchor the sector.

Corporate retail jewellers logged strong growth in early 2025, with revenues rising 25–35% y-o-y, supported by higher-value transactions and continued store expansion. Gold ETFs saw their first net outflow in 10 months in March, despite cumulative assets under management climbing to Rs589 billion ($6.8 billion). The RBI has moderated its gold purchases, but golds share in its reserves has risen to 11.7%. March also saw a sharp rebound in gold imports to $4.4 billion, reflecting continued appetite despite high prices.

Looking ahead, seasonal purchases, golds safe-haven appeal, and sustained investment interest are expected to support demand amid ongoing global uncertainty.

Monthly LBMA Price AM and domestic spot price changes and movement*

Jewellery demand slows, investment demand resilient: While jewellery sales have softened after the wedding season, physical investment demand for bars and coins remains high, supported by positive price momentum. Consumers are also increasingly monetising existing gold holdings, leveraging relaxed norms on gold-backed loans.

Gold-backed lending expands sharply: Lending by scheduled commercial banks against gold jewellery has surged nearly 120% y-o-y to Rs2,230 billion ($26 billion), signalling strong growth in gold-backed credit.

Gold ETFs regain inflows: After two months of outflows, gold ETFs saw net inflows of Rs2.9 billion ($34 million) in May 2025, with continued momentum in June. Assets under management climbed to Rs624 billion ($7.3 billion), up 97% y-o-y, highlighting golds strengthening position as a financial asset.

RBIs gold holding at its highest and golds strategic share grows: The RBI gold holding stood at the highest level of 879tonnes, and golds share in total forex reserves has grown to a record 12.3%.

https://www.gold.org/goldhub/gold-focus/2025/06/indias-gold-market-update-mixed-demand

Gold has great significance for Indians. The preference for gold jewellery in Indian culture has made it an integral part of everyday life. From rituals and ceremonies to religious festivities, adorning gold is considered a good omen. At the same time, it also provides an opportunity for the common man to invest in an asset class that is extremely reliable due to its appreciating value. Gold loans have, therefore, become an easy way of accessing credit for numerous borrowers, including individuals, small businesses and micro-enterprises. Globally, India is the worlds largest market for gold, and the gold loan market in India flourishes, with around 2,950-3,350 tonnes of gold used as collateral for instantly availing funds. Southern India has remained a significant market for gold loans due to the age-old preference for owning gold. During the year, NBFCs offering gold loans resiliently retained their market share despite stiff competition faced by banks. The Assets Under Management of most gold loan providers increased significantly due to the rising credit demand for small and mid-sized loans. Besides, digital adoption has played an integral role in streamlining loan processing. NBFCs demonstrated significant resilience and proved the ability to compete against larger financial institutions. The growth in housing and infrastructure loans further increased the contribution of NBFCs to the financial services industry.

ICRA Ltd in its research report published in September 2024 stated that it expects the organised gold loan market consisting of Universal Banks & NBFCs to exceed Rs 10 trillion in the current fiscal and further reach Rs.. 15trillion by March 2027. Public sector banks remain a dominant player in the space, driven by agriculture loans that are backed by gold ornaments. NBFCs have maintained their sizeable market share in retail, notwithstanding the recent sharp scale-up by banks in this space. Competition from banks has increased as more banks are upscaling their branches to offer Gold Loans.

(https://www.icra.in/Research/ViewResearchReport/5919)

Fast processing and minimal documentation: Since the loan is secured against physical gold, lenders require limited paperwork and eligibility checks, resulting in quick approvals and disbursals.

Instant access to liquidity: Gold loans provide ‘anytime liquidity, with funds often available within 10-30 minutes, offering immediate financial support when needed.

Low interest rates: Gold loans generally have more attractive interest rates than unsecured loans like personal loans, making them a cost-effective option for borrowers.

Flexible interest payment options: Borrowers can choose to pay only the interest during the loan tenure and repay the principal amount at the end, providing greater financial flexibility.

No income or credit score requirements: Lenders generally do not require proof of income or credit history since the gold itself secures the loan, making gold loans accessible to a wider range of borrowers.

Muthoot Finance Ltd, Indias leading NBFC and flagship of The Muthoot Group, is a trusted financial services provider known primarily for gold loans. Established in 1939 as ‘Muthoot Bankers and licensed by the RBI in 2001, we offer quick, affordable, and secure gold-backed financing with flexible repayment options and attractive interest rates. Over the decades, the Company has diversified into personal and business loans, expanding our footprint nationwide with a robust branch network.

Known for our customer-first approach, we offer quick, transparent services with simple eligibility and minimal paperwork. Backed by strong ethics and rigorous compliance, we ensure fairness and integrity in all operations. Muthoot Finances expanding branch network across India enables us to serve a diverse customer base in urban and rural areas, while consistently innovating and strengthening our position as a trusted leader in gold loans and financial services.

• Standalone Loan AUM rose 43% y-o-y to 1.08 trillion, the highest ever.

• Gold Loan AUM increased 41% YoY to Rs1.03 trillion, the highest ever.

• Disbursed Rs21.88 billions in gold loans to nearly 1.8 millions new customers.

• Quantity of gold held as security reached 208 tonnes, the highest ever.

• S&P upgraded rating to ‘BB+/B with stable outlook; Moodys upgraded to ‘Ba1 with stable outlook.

Strong brand name - Muthoot Finance has earned a reputation as one of the largest Gold Loan NBFCs in the country. Its established brand name and service excellence earned it the trust and loyalty of numerous customers.

Strong financial performance - The strong financial performance, operational efficiency and extensive branch network enable us to fulfil the diverse requirements of rural as well as urban customers.

Loan portfolio - With a strong Gold Loan portfolio, Muthoot Finance offers secured loans at attractive rates, making it the preferred choice for people in different parts of the country Branch network - The branches are present across the country, thereby offering the customers the convenience to access in urban and rural regions of the country.

Customer-centric - The documentation requirement and loan processing are streamlined effectively to offer the customers and borrowers a convenient and hassle-free experience.

Financial stability - Issues with asset quality can weaken the financial stability, especially in the non-gold loan segments.

High operational expenses - Increased operational expenditure can increase costs and affect the profitability of Muthoot Finance

Operational challenge - the operations of the gold loans are spread across different branches in a decentralised form, posing internal and external security risks.

Nature of gold loan - Gold loans are generally short-term, and the increased loan portfolio and size of the balance sheet every year can be challenging for the organisation.

Diversification of loan portfolio - Expanding its secured as well as unsecured loan portfolio, Muthoot Finance can diversify its offerings to cater to the increased customer base.

Digitalisation - Digital adoption can pave the path for improving the service offered and enhancing customer convenience. It is expected to expand the ability to reach a wider customer base and fulfil their diverse demands.

Strong competition - Muthoot Finance faces competition from banks and NBFCs, especially those offering unsecured loans as well as gold loans. It may negatively affect its profit margin and industry position.

Please see page 32 of the report for operational highlights.

Please see page 20 of the report for financial highlights.

Muthoot Finance recognises the evolving risks inherent to its business and has established a comprehensive risk management framework. The Risk Management Committee oversees this framework, ensuring effective identification, mitigation, and monitoring of risks that could impact our growth and operations.

Please see page 50 of the report for details on people practices.

The Company has an adequate internal control system to safeguard assets and protect against losses from any unauthorised use or disposition. The system authorises, records and reports transactions and guarantees that they are documented. The Companys internal controls are supplemented by an extensive programme of internal audits, reviews by the management, and documented policies, guidelines and procedures.

This Management Discussion and Analysis may include ‘forward-looking statements regarding the Companys objectives, plans, estimates, and expectations, as defined under applicable laws and regulations. Various factors, including a downturn in the financial services sector, political and economic shifts in India or key overseas markets, tax laws, litigation, labour issues, exchange rate movements, interest rate changes, and others, could affect the Companys operations. Actual results may differ significantly from those expressed or implied. This report should be read together with the accompanying financial statements and related notes.