Note ban impact behind us, on track to 12% growth: Muthoot Finance MD

Muthoot Finance Managing Director George Alexander Muthoot
Muthoot Finance, one of the major gold loan non-banking finance companies (NBFCs) in the country, has announced a 59 per cent growth in net profit for the quarter ended December 31, 2017, at Rs 4.64 billion (Rs 464 crore), compared to Rs 2.91 billion (Rs 291 crore) during the same period in the previous financial year. The total income stood at Rs 15.67 billion (Rs 1,567 crore) compared to Rs 13.46 billion (Rs 1,346 crore) during the same period a year ago. The company is expecting better growth this year for its loan disbursement compared to last year and a recovery to pre-demonetisation levels during 2018-19. In an interaction with Gireesh Babu, Muthoot Finance Managing Director George Alexander Muthoot speaks about the company's growth and expansion plans. Edited Excerpts:   

How do you see the performance for the quarter ended December?

The group's loan assets this year have reached Rs 307 billion (Rs 30,700 crore), which is a big achievement for us. The quarterly PAT (Profit after tax) is also the highest. If things are good, we should be able to do the same way in the future also. We might end up with 10-12 per cent growth for the full financial year. Last year, the group's loan assets were around Rs 286.61 billion (Rs 28,661 crore), when there was around 11 per cent growth. On a consolidated level, we should end up with Rs 320 billion (Rs 32,000 crore) this year. Before demonetisation, we were growing almost 15 per cent and the expectation was to grow at 20 per cent for 2016-17. Due to demonetisation, the past two quarters of the last year got hit. I think such things are behind us and we are on track to grow at 12 per cent this year. Probably, next year, things might look better. 

What is your expectation for 2018-19?

Things are starting to look better. However, occasionally, some external things happen. Next year, I hope we should clock 15 per cent growth. This year, demonetisation and the goods and services tax affected business. Further, overall credit off-take, which is very important, is absent. We think the interest rates are also hardening now, which means there is a little pick up in loans. When there is an increase in credit demand, we should see demand going up for our loans also.

How has the performance of the subsidiaries been and what are your expectations?

Home finance is doing well and we expect it to reach about Rs 14 billion (Rs 1,400 crore). Microfinance should reach about Rs 12 billion (Rs 1,200 crore). We were thinking of a diversification in our loan portfolio. We started the year with five per cent of other portfolios, which we are expecting to double to 10 per cent. Next year, we are targeting that loans other than gold loans should be 15 per cent of the total portfolio. This means that we are looking at other areas of growth also, whether it is home finance, microfinance or the Sri Lankan subsidiary. It is not derisking, but getting into other opportunities. There is nothing better than gold loans. The company has sufficient capital and headroom for more growth than this. However, we should target what we can achieve.

What are your plans for expanding into other lending businesses? Which are the segments you may look at?

The board always considers such options and, as and when good opportunities arise, we will certainly go ahead with it. We look at all options — from acquisitions to starting something greenfield. There are many other lending areas available for expansion. The board will discuss about taking a decision in the near future. There are opportunities in vehicle finance and personal loans. We will examine them. We have a big presence and branch name, which should help us in entering into these areas. We have 4,500 outlets and add around 150 branches net year-on-year.

What are the opportunities and challenges for the gold loan business in the near future?

India is a growing country and, as and when credit picks up, we are ready to grow. I think the opportunity is always there. The challenges are that we should not get surprises. Nothing has happened in the regulatory scenario in 2017 specific to NBFCs or gold loans. We have a capital adequacy of 27 per cent and are not looking at fundraising other than some NCDs (Non-convertible debentures). 

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