Muthoot Finance remains bullish on gold lending activity and believes there will be more demand as the economy opens up. In an interview with Activity areaGeorge Alexander Muthoot, managing director of Muthoot Finance, said the company auctioned off ₹4,000 crore of gold in the third and fourth quarters of the previous financial year as customers were unable to repay their loans.
What is your expectation on the gold loan application?
With the opening of the economy, small businesses and MSMEs start their activities. We expect the demand for gold loans to start increasing over the next quarter and we would see good demand for gold loans over the next few quarters.
There was a 3.5% decline in fourth quarter earnings on an annual basis. Is this a concern?
Earnings are still up 6% for 2021-22 on an annual basis. Assets under management also increased by 11%. We would have done much better had it not been for the gold auctions in the third and fourth quarters. AUM would have increased by at least 15 percent. We remain bullish on a 12-15% growth in gold loan assets under management in the current fiscal year as well.
How much gold did you auction off?
We auctioned approximately ₹4,000 crore of gold during the third and fourth quarters of the previous financial year. We have supported clients during the pandemic and granted them loans. Unfortunately, for some of them, their businesses did not fully restart and they struggled to repay the loan.
What is your growth plan for the new fiscal year?
We want to develop the activity by branch. It has risen from around ₹12 crore to ₹9 crore in the past two years. We would like it to go up to ₹15 crore per branch. We are awaiting further Reserve Bank approvals for new branches. We have applied for 100-150 branches and expect approval to arrive shortly.
Do you see the banks’ gold lending business as competition?
I wouldn’t say competition. They are also expanding their business and attracting new customers. With the banks offering gold loans, there is probably a bit more comfort and credibility for the company. The base is growing. Today, only 20% of gold available to the public has been monetized for gold lending. The base can grow very well.
How is your mortgage business doing?
We haven’t been aggressive on mortgage lending for the past six to seven quarters. But we have restarted the business and expect it to grow by ₹600 crore this financial year. We focus on the affordable home loan segment. The idea is to offer home loans and property loans to clients coming to Muthoot Finance for gold loans.
You recently announced a ₹300 crore NCD issue. What will the funds be used for?
We have a good amount of bank loans and MNT. We were slowly going through the retail NCD issue for the last two three years, but our customer base kept asking us for a new number. We raised ₹400 crore a few months ago and now we are raising ₹300 crore. These are focused on retail customers. Going forward, we should have two or three more issues this year. Retail clients have a good option with MNTs with higher interest rates than term deposits.
Are you looking for home gold loans?
We launched it on a pilot basis in four cities, we are going to extend it to other cities. It will focus on major cities and we plan to expand it to another 50-60 cities.
May 27, 2022