Muthoot Finance to add 400 branches this fiscal, says Alexander George Muthoot

"We are looking at a 15 percent growth in FY25," says Joint MD George Alexander Muthoot.

Traditional gold lender Muthoot Finance plans to add around 400 branches in 2024-25, Joint Managing Director Alexander George Muthoot said.

In a conversation with Moneycontrol, he said that in the first quarter of this fiscal year, the lender group added 218 branches. “So, we'll probably end the year with about 300 or 400 branches.”

After reporting a record quarterly profit of Rs 1,196 crore in Q1, the lender is aiming at a 15 percent overall growth this fiscal. “We've also registered the highest ever profit in any quarter in the history of this company at Rs 1,196 crore, a 14 percent growth. We've also had our highest ever gold loan disbursements in any quarter, which stood at Rs 73,648 crore. Going forward, we see at 15 percent growth in FY25,” Muthoot said.

Excerpts from the interaction with Moneycontrol:

Other than reporting the highest quarterly profit in Q1, you saw some sequential pressure on your asset quality in Q1. What happened here?

We definitely had a historic quarter where we've seen the highest ever consolidated loan asset management growth with about 28 percent increase to Rs 98,048 crore.

In terms of pressure on our asset quality, our expected credit loss (ECL) provisioning has gone up fundamentally because of two reasons. One is on the account of the higher level of loan growth that has happened during the quarter, which is about Rs 8,500 crore. So, ECL provision on stage one and stage two has gone up by about Rs 81 crore, and on account of increase in stage three, which is the NPA assets, ECL provision has gone up by Rs 130 crore.

Will you be able to settle down the asset quality pressure?

The sequential pressure on asset quality is an accounting regulatory requirement and we have to consider non-performing assets (NPA) and, accordingly, we have to make provisions. But the gold loan ECL provisions will not translate into actual losses.

Also, we have a very good cushion and as you know, the mandate by the regulators is to maintain about a 75 percent loan-to-value (LTV) ratio. But in this particular book of NPA, the LTV is only at 54 percent.

How are you looking at your branch expansion model?

This year in Q1 alone, we have added about 218 branches. So, we'll probably end the year with about 300 or 400 branches. This is a very calibrated strategy and we don't want to go overboard or not underboard.

In the past few months, we have seen the RBI hammering on the gold-loan portfolio of some NBFCs due to compliance and regulatory issues. How do you see this working for Muthoot Finance?

We are well within the norms. We also have a very strong internal audit team that is spread across more than 1,000-plus auditors who are going across the branches, ensuring the corporate governance standards, the accounting standards, the gold checking standards are as per the highest levels of corporate governance standards.

And we maintain a very, very effective control over the branches. We have 80 regional offices too, which are controlling all these various branches. So, we have a good internal audit and a vigilance team that ensures governance standards, and we take proactive steps to be highly compliant.

How do you see business growth in FY25?

We are looking at about 15 percent growth on the AUM, which we started at the financial year because we don't want to revise estimates so quickly just after one quarter's performance.