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Elevated gold prices, coupled with tighter access to unsecured credit are creating a strong growth outlook for Indias gold-financing industry, according to a report by Antique Stock Broking.
As per the brokerage house, Indias gold-financing market, valued at Rs 18.6 trillion, remains structurally underpenetrated. Meanwhile, higher gold prices and tighter access to unsecured credit have driven gold non-banking finance companies (NBFCs) to a ~55 per cent AUM CAGR during FY24-26. It highlighted in its report, Indian households hold an estimated ~34.6k tonnes of gold, equivalent to ~89% of Indias GDP and ~3.1x household equity holdings, adding, only ~2.95-3.35k tonnes of this stock is currently pledged as collateral, implying that just ~9-10% of household gold is formally monetised. According to the brokerage, the large pool of unpledged household gold represents a large addressable pool that banks and NBFCs can bring into the organised lending ecosystem. Aapart from this, it should be noted further that India accounts for around 26 per cent of global gold demand, with jewellery remaining the dominant form of consumption. At the same time, retail investment demand for bars and coins has also been steadily rising, reflecting the yellow metals continued appeal as a store of value, inflation hedge and safe-haven asset. With annual gold consumption steady at ~750-840 tonnes and the value of this consumption rising, the underlying collateral pool is also expanding, supporting higher loan ticket sizes and, consequently, stronger AUM growth for gold financiers, the brokerage house noted. At the same time, elevated gold prices and tighter access to unsecured credit are emerging as key catalysts for growth in gold financing. The yellow metal was trading at around RS 4,396.60 at the time of reporting. AUM of NBFCs specializing in gold financing (entities with 50%+ of AUM in gold loans) is expected to grow at a ~40% CAGR over FY25-27E to reach INR 4trn by FY27E, outpacing the ~27% CAGR recorded over FY23-25, it noted, adding, acceleration is expected to be driven by elevated gold prices, a shift towards secured credit, and an evolving regulatory environment. Additionally, tighter access to unsecured credit is pushing borrowers towards alternative funding, benefiting gold-loan NBFCs despite rising competition, as per the brokerage house while higher gold import duties and import restrictions have supported gold prices, further strengthening the growth outlook for gold financiers. The governments recent measures to curb gold imports, including an increase in the gold import duty to ~15% from ~6% earlier and a cap on imports at ~100kg per license, have further supported gold prices, aiding growth prospects for gold financiers, it said. (ANI)
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