Interview| Guidance is for 15% growth, will surely achieve it: George Alexander Muthoot

George Alexander Muthoot, MD, Muthoot Finance

NBFC Muthoot Finance expects the business to improve in the second quarter after a muted first quarter. Managing director George Alexander Muthoot talks to FE’s Rajesh Ravi about the gold loan business and other plans. The Kerala-based company reported a 22.49 % year-on-year increase in its Q4 consolidated net profit to Rs 1,023.76 crore. Excerpts:

What is the outlook for the fiscal given that Q1 started with a lockdown?

It is as bad as last year. May was a washout However, things are starting to improve from the third week of June. But we are very sure that Q2 will be very good. The first quarter’s growth will be muted, but we will be able to make it up in Q2.
What is the guidance for the fiscal?

We have given a minimum guidance of 15% and we are sure that we will be able to achieve that. We have been achieving 15-25% growth in the past few years. The share of non-gold divisions in total AUM came down during Q4 and profits of the non-gold divisions are also seen lower. The non-gold business has been declining in the last four quarters and we have run-down our book in the vehicle and housing finance.Only microfinance has done some business. The gold loan was our savior and share of non-gold businesses in the profit has come down to 6%.AUM of non-gold has come down to 10% from 12 % in the last fiscal. I think non-gold businesses will improve in coming quarters.

What is your average LTV for the previous financial year?

The average LTV for the last fiscal was 68%. Normally, it fluctuates with the price of gold and moves up when the gold price declines. LTV does not affect us very much as people do not abandon their jewellery. There are reports of higher auctions by some NBFCs. We give loans for 12 months and are not worried about defaults. It becomes an NPA only after 15 months. In 12 months, almost 95% of our customers take back their gold. We auctioned only Rs 171 crore of gold in FY21. In FY20, we had auctioned loans worth Rs 500 crore and in FY19 loans worth Rs 1,000 crore. Our book size is Rs 50,000 crore and we have given loans of Rs 1,20,000 crore and we have only auctioned Rs 171 crore of bad loans. Our competitors had to auction because they give the loan for 90 days. In the last fiscal, we auctioned very old loans in our loan book.

How much is your cost of funds and outlook?

In the last 1-1.5 years, the cost of funds have come down by 150 bps. But I think it has bottomed out and inflation will catch up. Our incremental cost of funds is 7.5-8%. We have some legacy high-cost funds in our book.

What is your average ticket size of loans and new client acquisition?

Our average ticket size is `60,000 and we add 2-3 lakh new customers every quarter. Live accounts with us currently are at 60 lakhs.In the last two years, more than two crore customers have done business with us. It is a big churn business and the average tenure of a loan is only four months.

What about your branch expansion in the current fiscal?

We normally open 100-150 branches every year. Last year, we opened 85 branches. We will start growing the non-gold business from the second quarter.