Gold stocks have been doing well today after the KUB Rao Committee said that there is no risk to the financial system because of gold loan NBFCs. George Alexander Muthoot, MD, Muthoot Finance told CNBC-TV18 that the move by the committee is positive.
We have also come out with four listed NCDs. With four listed NCDs we have raised around Rs 2,000 crore
Gold stocks have been doing well today after the KUB Rao Committee said that there is no risk to the financial system because of gold loan NBFCs .
George Alexander Muthoot, MD, Muthoot Finance told CNBC-TV18 that the move by the committee is positive. "The committee report removes negative perception of the sector since KUB Rao is an RBI person and therefore people are likely to believe," adds Alexander.
Below is an edited transcript of George Alexander’s interview on CNBC-TV18
Q: What is your view with regards to the KUB Rao Committee recommendations?
A: KUB Rao has finally submitted his report and has come out in the public. As per the report, we are happy that there is no systemic risk to the financial system because of gold loan NBFCs. It is a very positive point for us. Also the report confirms that the gold loan is a socially useful function and it serves the public. This is exactly what we wanted the public to know, especially from an RBI designated or RBI nominated committee. KUB Rao is an RBI person. This will change the negative perceptions which were in the minds of many people.
Thirdly, we also had the Association of Gold Loan Companies (AGLOC) interacting with the committee and have acknowledged the good work we have done in giving them all the information which they wanted for their report. So finally the negative perceptions have been removed off this sector from the public.
A: No, I do not think so. The funding for the NBFCs comes through various channels such as the bank funding. With respect to the bank funding there has never been any curbs, but a single bank should not have an exposure of more than 7.5 percent of its total assets to a single NBFC. We have relationship with more than 30 banks and no bank have ever crossed this limit and there are many more banks. This sector has been good and we are always trying to diversify our funding.
We have come out with four listed NCDs also. With four listed NCDs we have raised around Rs 2,000 crore. We are diversifying our funding portfolio. If the NCDs is not there we will go to banks, if the other is not there we will go to the listed NCDs. We can always tap various sources from the market and if the negative perceptions are changed, we can always do more funding from the mutual funds also. So we have many sources or avenues of funding. I do not think these things would matter much to us.
A: Not at all. Rules need to be tightened because there are so many Non-bank financial companies (NBFCs) coming and Rao Committee has to see not the big NBFCs, they should go to the whole spectrum of small NBFCs and see which practices are needed to be attempt.
Muthoot Finance stock price
On September 15, 2014, at 15:21 hrs Muthoot Finance was quoting at Rs 191.20, down Rs 5.55, or 2.82 percent. The 52-week high of the share was Rs 221.00 and the 52-week low was Rs 89.10.
The company's trailing 12-month (TTM) EPS was at Rs 19.30 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 9.91. The latest book value of the company is Rs 108.04 per share. At current value, the price-to-book value of the company is 1.77.
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