Gold loans: India’s unlikely credit engine primed to formalise (stage)

Hello,

PE continues to dominate India’s deal landscape even as M&A cools elsewhere. Partners Group is set to acquire 75% of Infinity Fincorp in a $230 million transaction, marking a decisive move into Indian financial services. In infra, a $750 million Apollo-led investment in Adani’s Mumbai airport signals deepening global interest in regulated assets. 

Meanwhile, Adani Power’s $480 million bid for Vidarbha Industries Power received NCLT approval, another win for India’s bankruptcy code.

On the consumer side, Diageo has taken a majority stake in Nao Spirits, backing India’s homegrown gin wave. Nuvoco’s $216 million acquisition of Vadraj Cement is a promising bit of industrial M&A.

In big-ticket brewing, Reliance and Havells are reportedly eyeing Whirlpool’s global business, heating up the chase for a marquee global business that may lead up to a very competitive bid or JV. There are rumours at SBI General Insurance of Warburg Pincus’s exit, which may bring in new strategic interest, or even a listing.

I hope you enjoy this week’s roundup, and please do connect with me on LinkedIn to find out how I can help with your next M&A deal.

Let’s dive in.

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Market Trends

Collateral beauty

Civilizations across the ages have lusted after gold, prizing it as a symbol of wealth and power. So who can argue when Bain Capital considers paying up for an 18% stake in Kerala-based lender Manappuram Finance as a means to enter India’s approximately $86 billion+ gold loan market?

That and the recent acquisition of Paul Merchants Finance’s gold loan business by L&T Finance suggest rising compliance costs, fintech ambitions, and private equity timelines are converging, as the sector enters a phase of consolidation, thanks to gold’s countercyclical appeal and deep rural reach.

At the same time, the RBI’s 2024 draft norms are pointing to a crackdown on scale inefficiency and informal practices, especially around loan-to-value (LTV) tracking, gold purity standards, and tenure ‘enforcement’ – the period during which a borrower must repay the loan. 

Smaller NBFCs and cooperatives, long reliant on looser practices, may find it unviable to meet tighter compliance standards, pushing them toward strategic sales.

The golden hedge

Historically, whenever Indian equities have faltered, gold has surged. During the 2008 crash, Indian markets plunged by 50%, while gold rose 34%. In the Covid-linked dip of early 2020, gold again outperformed equities. This pattern makes gold a great hedge for investors and a critical lifeline for lenders.

In India, demand for gold is as cultural as it is economic. Jewellery ownership often doubles as collateral, keeping the households’ credit engine running in hard times. With domestic gold prices relatively stable, NBFCs and banks have long relied on gold lending to anchor their secured portfolios.

As of May 2025, the gold price in India has delivered over 25% year-to-date returns.

Source: World Gold Council

For lenders, this translates into strong recovery value on defaults and a predictable, inflation-resistant asset, especially useful in rural regions where land titling is murky and enforcement is costly.

Book designs

FY21-FY22 data shows how gold loan disbursements fell from their Covid highs but have since stabilised. Kerala-based leaders Muthoot Finance (Muth) and Manappuram Finance (MFGL) – the lead players in the sector – have maintained steady gold loan books in the range of $6.8-7.6 billion and $2.6-2.8 billion, respectively.

Source: VEF

This stabilisation reflects a shift from emergency borrowing to more structured demand, pointing to long-term viability. Monthly disbursements as a share of loan books have returned to pre-Covid levels, indicating improved portfolio management. 

For buyers like L&T, this signals an opportunity to acquire seasoned portfolios and ready branch infrastructure with manageable risk.

A formal expanding, an informal shrinking

Between FY18 and FY22, India’s organised gold loan sector, comprising banks and NBFCs, grew at a compound annual rate of 18.2%, outpacing the unorganised segment. In FY22, the organised market accounted for $71.3 bn, or 37% of the total $192.7 billion gold loan market.

Forecasts suggest the organised non-agri gold loan segment alone will hit $53.2bn by 2025. Within the organised share, NBFCs control 60% of the market, with banks accounting for the remainder.

This structure makes smaller NBFCs perfect M&A targets for private banks looking to deepen rural credit quickly; and also larger NBFCs, seeking to expand compliance-ready books, who see gold lending as a natural next step after maturing unsecured credit businesses.

Let us not forget India’s fintech firms, such as Rupeek – they see gold as the fastest way to break into secured lending. 

Meanwhile, big private equity players like Warburg Pincus (invested in Muthoot) or Bain Capital (formerly in Axis Finance) may be looking to consolidate or exit as the sector matures.

Looking at the big picture, India’s gold loan businesses will have to formalise fast because of policy reform, driven by resilient asset performance and stable disbursements. The macro story (gold’s resilience), the micro story (NBFC balance sheet health), and RBI tightening are nudging toward a consolidation wave. 

Deals like L&T’s acquisition of Paul Merchants could be an early sign of a sector entering its M&A moment.