Communication Feature
34 DALAL STREET INVESTMENT JOURNAL I JULY 22 - AUG 4, 2019 DSIJ. in^
We are keen on opportunities fordiversifying our product portfolio
How do the rising gold prices impact your business?
The emotional value associated with the household jewellery
(gold) holds back people from selling them to meet their
immediate financial needs. As an alternative, people pledge their
ornaments as collateral and secure short term loan. The relative
ease in obtaining a loan approval by NBFCs at lower rate of
interest than the local moneylenders and comparable with the
commercial banks has boosted the popularity of gold loans and
the relevance of NBFCs in this segment. With the enormous
scope for growth of gold loan business, the rise in gold prices
would have an impact on both, lenders and borrowers. The
borrowers will pledge lesser quantity of gold as collateral and be
eligible for higher amount of money, while as lenders the risks on
our loans given tend to reduce as the prices of collaterals held by
us increases. Another trend that we witness with the increase in
prices of gold is more people bringing their jewellery to market
to meet their financial needs.
How is your microfinance and vehicle finance business contributing
to growth in revenues and profitability?
We hold 70.01% equity share capital in microfinance NBFC
Belstar Investment and Finance Private Limited. Its loan
portfolio grew by 62% to 1842 crore in FY19 with profit after tax of73 crore as against PAT of `27 crore.
Muthoot Money Pvt. Ltd, the wholly-owned subsidiary of
Muthoot Finance Ltd., extends loans for vehicles and
equipments. Its loan portfolio stands at 3107 million in FY19 with profit after tax of3 million.
Our non-gold business allows us to cater to customers by
identifying niches in otherwise crowded segments like micro
financing and vehicle financing. In FY21, we would like to grow
our microfinance portfolio to 2900 crore and the vehicle finance portfolio to850 crore.
Is the liquidity crisis for real in India? When do you see the liquidity
concerns subsiding?
The NBFC sector witnessed liquidity issues. However, gold loan
business, due to the nature of short-term loans and recoveries
after 3 months, did not have a major problem of liquidity. These
concerns seem to be subsiding now, with the exemption of Debt
Redemption Reserve (DRR) for public issues and credit guarantee
provided by the government in Modi budget 2.0. The relaxation
in policies in the affordable housing segment like interest
deduction on home loans, tax holiday for developers and also the
housing cost being fixed at `45 lakh and below, will also help ease
the liquidity concerns.What is your growth outlook for next three years?
Our short term, medium and long terms plans are interrelated
and include a host of initiatives. We foresee the AUM to cross
`55,000 crore by the end of FY22. Our target for loan growth is 15
per cent for this year and the growth is aligned in the similar
pattern for the upcoming years. We plan to venture in newer
geographies in northern and western region through branch
expansions. The average business per branch is `7.50 crore in
FY19, which we expect to increase to average of `15 crore per
branch in coming years. We are also keen for opportunities for
diversifying our product portfolio and thereby leveraging our
existing broad customer base.The end of FY19 has brought a change in the mix, as the
dependency on the non-gold business is now 12 per cent. In
FY20, we expect the non-gold business to be 15 per cent of the
total AUM ,with continued growth trajectory for the coming
years. While we are the world's largest gold loan company, this
year we shall also focus on ensuring that all our other financial
products also gain prominence in their respective markets in the
country, especially insurance, domestic money transfers,
international money transfers, Indo-Nepal money transfers,
foreign exchange and outward remittances business (that helps
Indians send money abroad).We also plan to scale up our home finance business by
aggressively pursuing our plans for affordable housing in newer
geographies. While our other financial products have been
showing modest growth, we also plan to increase our personal
loan business through concerted efforts.How is the current budget expected to impact your business?
In the maiden budget, the government has highlighted its thrust
to infuse liquidity in the NBFC sector. In line with our
expectations, the Debt Redemption Reserve (DRR) for public
issues has been exempted. Also, the credit guarantee provided by
the government will open up the liquidity line for our business.
We welcome the government's focus on affordable housing. The
interest deduction on home loans raised by `1.5 lakh to `3.5 lakh
and also the housing cost being fixed at `45 lakh and below will
help to boost this segment. With RBI now being the regulatory
authority for housing finance as well, we look forward to easy
regulation as all financing sectors would now fall under one
authority. In order to accelerate the goal of 'Housing for All', the
tax holiday provided to developers will also benefit us.George Alexander Muthoot
Managing Director, Muthoot FinanceMuthoot Finance