Muthoot Finance | Muthoot Finance share price: In the last 3 months we have more new clients; largest disbursements: George Alexander Muthoot

“We should see good quarterly growth in this quarter and also in the next one or two quarters we should see a good recovery in gold lending. Not only gold lending but other lending is also starting to increase. It’s because the economy has opened up,” says George Alexander Muthootdoctor, MuthootFinance.

Gold was a safe haven. We’ve seen how gold prices have fared and price action during the geopolitical tension and even as equity markets turned volatile last month. What has been the impact on your gold lending business?
The price of gold has seen reasonable fluctuations over the past two months. But overall, over the past two years, the trajectory has been steadily increasing. He did not fall. The price can be said to be almost stable and this is good for any business and of course gold lending business too. Sometimes there are ups and downs, but today the price is stable.

But have you seen higher disbursements? Have you added more consumers to the user base?
Yes. Over the past three months, we have added more and more new customers. Economic activities everywhere – in cities as well as in rural areas – have started to develop. So we see disbursements increasing everywhere. We should see good quarterly growth in this quarter and also over the next one or two quarters we should see a good recovery in gold lending. Not only gold loans, but other loans are also starting to increase. This is because the economy has opened up, the fear of Covid-19 is behind us and we should see a take off from here.

When we talk about gold lending volatility, price fluctuation, with the kind of changes the company has made over the last few years – whether it’s LTV, systems, processes, risk management – that have evolved, do you think this volatility is now part of the gold market and has the company adapted to these changes, at least for the majority of loans?
Yes, I would like to correct you by saying that we should not call gold lending commodity lending, because we only give household ornaments and it is certainly not commodity lending. But so be it, in the last three or four years, after demonetization, there’s been a lot of transferring or maybe moving customers from the branch and cash payment and so on to the online payment system. It actually received a bit more momentum during the pandemic when branches couldn’t be opened.

So over the last three or four years we’ve evolved in the direction that customers can do their transactions or maybe make their payments etc. online much better if you look at the last three or four years and every day the number of the number of customers doing business or transactions online is certainly increasing and that is a good sign.

But, of course, that being said, customers must come to the branch to bring their gold ornaments to safety and physically pick them up. We couldn’t do it online of course. We sometimes help customers by going to the house and collecting the gold, but these are very few cases and only for large customers. So processes have evolved, businesses are changing and we are still trying every day to see how we can get more and more customers to use gold as a means of financing. This number is also increasing day by day.

One of the main investors told me that the strength of Muthoot Finance is the number of loans they disburse in a day. How many loans do you disburse in a day compared to some of your other peers?
We have nearly 1,50,000 customers who come to our branch every day. Half of them come to take gold loans, the other half to maybe take back their gold loans and some of them come to serve their interest and so on. There are footsteps in the branch. As I said earlier, a customer also definitely likes to come to the branch, to have the touch and feel of the branch to take the gold loan, so he comes there for a gold loan.

The highest disbursement was made in the third quarter of last year when we disbursed a loan of around Rs 50,000 crore in gold. On average, we disbursed around Rs 30,000 crore every quarter. Thus, the number of customers coming to take out a gold loan should be between 50,000 and 60,000 per day.

What about non-gold lending activity? Analysts estimate this should improve to around 14-15% from the current 10% over the next three years. Are you on the right track?
Yes, we are on the right track. All of our processes and all of our staff are ready for this. It’s just that the industry wasn’t doing well and that means affordable home lending was not doing well. It’s just starting to pick up and so probably over the last four or five quarters we haven’t pushed any growth in the affordable mortgage portfolio as well as the vehicle portfolio.

But now that the economy is opening up, people are getting more and more jobs and in this case, affordable home loans as well as auto loans should see the light of day. We have enough funds, enough branches and enough staff. We’re just waiting for economic activity to pick up so we can ramp up affordable housing business as well as auto lending business.

As far as microfinance is concerned, she has never had any major problems. They are on the right track, the microfinance activity carried out by Belstar, our subsidiary, is doing well. They have started more and more disbursements and the book is also developing reasonably well.

There has been quite a bit of disruption in the area of ​​gold lending. For example, a company like Bharat Pe has also entered the gold lending segment. What is your digital strategy, the growth levers in place for the future of the company? Are you worried about this disruption and what will be the main focus for you?
I wouldn’t call it a disturbance. More and more people entering the gold lending business are probably good for NBFCs, for banks, and for companies that you think are all considering gold lending. It’s not a disruption, it’s just more and more people getting into it.

But I’m sure that those who are really serious about this business, those who want to continue with this business in the future, not just for a quarter or three quarters but for years together, have a reasonable space to play and they will get reasonable business. But for those who come to play short term, I don’t think this is the right deal for them.

What are the future prospects in terms of the funding environment for CCNBs? How do you see the overall funding cost and evolution of NIMs?
Today, the cost of funding is down about 200 basis points. We are therefore able to easily access financing, whether it is NCD, non-convertible debentures or bank loans. Now the funding cost is around 6-7%, which is about 200 basis points lower than what we were getting before. Funding availability is definitely there, no problem as recently we also upgraded to AA minus and that is a feather in our cap. We are almost on track to get much better funding.