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How shareholders in gold loan companies lost money?


How shareholders in gold loan companies lost money?
Unending regulations and guidelines for gold loan companies has left shareholders in these companies poorer, with a massive loss in market capitalisation.


First, an associate for Muthoot Finance (a major Kerala based gold loan company) was debarred from accepting deposits, than it was the loan to value norms being changed, than came more stringent KYC norms on lending and once again now another an associate of the Muthoot group, Muthoot Estate has been debarred from accepting deposits.

Gold loan company Manappuram Finance has seen its share nosedive from a high of Rs 70.05 to the current value of Rs 30. Muthoot Finance on the other hand has seen its share price collapse from near Rs 200 to the current price of Rs 130.

In fact, the day the loan to value ratio was changed to 60%, Manappuram and Muthoot Finance both saw shares fall by almost 15 to 20% in a single trading day. Gold lending companies which have been growing at a scorching pace may now find their performance more tepid, following a series of new norms and regulations.

This has resulted in a dramatic reaction in the share prices. While the new norms for the companies by the RBI is welcome, it has certainly left shareholders poorer.

Story first published: Friday, March 30, 2012, 12:50 [IST]
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