Feb 13 (Reuters) - Shares of India's Muthoot Finance dropped more than 12% on Friday, heading for their steepest one-day percentage decline in three-and-a-half years, as investors raised concerns over the durability of a surge in third-quarter earnings.
The shares were down 12.3% at 3,566.50 rupees by 11:23 a.m. IST while India's benchmark Nifty 50 was down 1.02%.
The gold loan provider posted a near doubling of its quarterly profit to 26.56 billion rupees ($292.88 million) on Thursday.
Gold financiers have benefited from record-high gold prices in recent quarters and tighter lending norms in unsecured retail loans, which have pushed borrowers towards gold-backed financing.
"Investors are questioning whether the strong performance in December quarter can sustain and it seems that it could be difficult," said Aamar Deo Singh, senior vice president at Angel One, adding that while the profit doubled, a significant portion of it came from interest income write-backs.
"Gold loan tonnage has dropped, while growth in customer addition has slowed due to high gold prices," Singh said.
Ambit Capital said that about 6.4 billion rupees of the earnings came from interest income recovered from non-performing loans, which it described as non-recurring.
After adjusting for this, the earnings were largely in line with estimates, the brokerage said, adding that current valuations "leave no margin of error."
Jefferies said the finance company's core net interest margins fell about 70 basis points sequentially, even as reported margins improved on recovery-related income.
Jefferies flagged a 1% sequential decline in active customers and lower loan-to-value ratios while CLSA noted a slowdown in customer additions and a sequential dip in gold tonnage.
Muthoot Finance's shares, rated "hold" on average by 21 analysts, have risen 6.7% so far in 2026 after a 78.4% jump last year.
($1 = 90.6850 Indian rupees)
(Reporting by Surbhi Misra, Vivek Kumar M and Bharath Rajeswaran in Bengaluru; Editing by Mrigank Dhaniwala)
By Surbhi Misra and Vivek Kumar M
