Muthoot Finance expects gold loan business to drive bottom line in Q2

The Kerala-based finance company, which also operates a home loan, micro-finance and insurance broking subsidiaries said the company is going slow on non-gold business and the share of gold loan profit in the consolidated profit for the first quarter has increased to 99%

NBFC Muthoot Finance expects gold loan business to drive its bottom-line in the second quarter while demand for vehicle finance and home loan division is expected to remain muted for another quarter.

The Kerala-based finance company, which also operates a home loan, micro-finance and insurance broking subsidiaries said the company is going slow on non-gold business and the share of gold loan profit in the consolidated profit for the first quarter has increased to 99%

“We should be seeing growth in the non-gold business only from the third quarter. Vehicle finance and home loan sector has not picked up so far and is still in difficulty,” George Alexander Muthoot, managing director, Muthoot finance, said.

He added that the NBFC consciously decided to go slow in terms of non-gold lending business on account of continued uncertainty and emerging uncertain credit behaviour. The net profit of the gold loan division increased 16 % year on year to Rs 971 crore in Q1 of FY22 while it declined 3% quarter on quarter from Rs 996 crore in Q4 FY21. On a sequential basis, the loan assets under management of the Kerala-based lender decreased Rs 145 crore in Q1 as the company decided to go slow on non-gold business.

Gross loan assets under management for Q1 stands at Rs 52613.8 crore, with gold loans assets under management seen at Rs 52068.6 crore and non-gold AUM at Rs 545.2 crore. George Muthoot told FE that gold loan business picked up in July and August after remaining sluggish due to Covid-related restrictions in April-June period.

“With shops and small businesses opening up, demand for gold loan will pick up. We will do well in the remaining three quarters and achieve the guidance of 15% easily,”he added. Regarding the cost of funds, he added that it has stabilised and unlikely to come down further. Incremental cost of funds for the NBFC stands at 8.15%.

Bad debts written off by the lender in the first quarter stands at Rs 9.1 crore, which is seen as 0.02% of the total gross loan assets.

The lender also added 50,000 new customers in the first quarter and plans to add 100 branches in the fiscal year.