MGFLIN: Back to gold

Research evidence excerpt

MGFLIN: Back to gold

ey continue to weigh heavily on

profitability. And although the subsidiary’s capital adequacy remains comfortable at 20.2%, and

supported by balance-sheet contraction, the benefits are offset by weak earnings. Despite

multiple corrective actions - including tighter underwriting standards aligned with the SRO and

RBI norms, reduced borrower-level indebtedness, restrictions on disbursements and enhanced

collection practices - the steep contraction in AUM, sustained higher credit costs and lingering

regulatory risks remain an overhang on Asirvad’s, and more broadly on MGFLIN’s, operations,

consolidated earnings and its financial metrics.

From diversified to gold exposure concentration risk

MGFLIN’s business profile has become increasingly concentrated in gold loans over the past two

years following a strategic shift away from its earlier diversification agenda across microfinance,

vehicle finance, MSME lending and housing finance. This transition was driven by sustained

asset-quality pressures across the non-gold businesses, particularly microfinance, and the

superior growth, profitability and risk profile of gold loans. As a result, gold loans accounted for

80% of consolidated AUM as of 4Q FY26 (FY25: 59%; FY24: 51%), with gold AUM nearly doubling

y/y, while the contraction in microfinance and other non-gold portfolios has increased MGFLIN’s

reliance on a single product for earnings, liquidity and capital generation, resulting in a less

diversified business profile.

The group’s credit profile is now more sensitive to movements in gold prices and developments

affecting the gold-loan sector given its increasing reliance on a single asset class. Recent

volatility in bullion prices highlights these risks, with 3%-4% price movements in a single day is