Gold Finance NBFCs – Disruption Inevitable, But Long Term Story Intact: Systematix


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Systematix Research Report

Indian households hold a mammoth 14% share of global gold at 27,000 tonnes, only ~20% of which is pledged. The unorganised sector holds a grip on the chunk 65%, with organised players like banks and non-banking financial companies toying with the remaining 35% share.

In value terms, India’s share translates into Rs 130 trillion (Rs 85 trillion jewellery share), which at 75% loan-to-value, presents a potential Rs 63 trillion market opportunity; currently, the organised market operates at mere ~ Rs 6 trillion.

Specialised gold finance NBFCs like Muthoot Finance Ltd., and Manappuram Finance Ltd. are the undisputed leaders in India’s gold financing business since last ~15 years, but the two now find themselves in the eye of a storm, as banks/ fintechs and other NBFCs like IIFL Finance Ltd. have turned aggressive in the space.

What attracts this large spectrum of organised financial players into the arena is safety from an asset quality perspective and the huge untapped potential. Their sudden attention to gold financing could disrupt the market near term, especially for the two specialised players.

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