In an interview to CNBC-TV18, George Alexander Muthoot, Managing Director at Muthoot Finance speaks about better business prospects going forward. He expects net interest margins (NIMs) to be stale at 9.5 percent, while asset quality will see improvement.
Muthoot Finance is hopeful of clocking better performance going forward. George Alexander Muthoot, managing director at Muthoot Finance told CNBC-TV18 that demand for gold is still there. He sees stable net interest margins (NIMs) at 9.5 percent and expects asset quality to improve. Non performing assets (NPAs) may also come down this quarter, he adds.
The company’s non convertible debentures (NCDs) issue is also underway. “We are paying the maximum of 12.25 percent and the NCDs are for 400 days to six years for a total of Rs 300 crore”, he told CNBC-TV18. He also says that the company may go for another round of NCD issue if the growth prospects looked better.
Below is the edited transcript of his interview to CNBC-TV18.
Q: With gold once again looking like a winning bet, are you seeing an increase in business? Any change in business in the last one quarter?
A: Yes. Some of the misconceptions about gold have also changed now. Previously people were thinking that gold would lose its lustre with the public. It appears that it has still not lost it. That itself is a good thing.
Q: You have a non-convertible debentures (NCD) issue currently underway. What are you paying?
A: We are paying the maximum of 12.25 percent and the NCDs are for 400 days to six years. It is for Rs 150 crore plus another Rs 150 crore. So total Rs 300 crore of the NCD issue.
Q: What would your impact be in terms of cost of funds as well as net interest margins (NIMs) in this coming quarter?
A: We saw small contraction last time. This quarter NIMs should be stable at around 9.5 percent.
Q: What about asset quality?
A: Asset quality is definitely better and our NPAs, which was less than 2 percent, should come down a bit only in this quarter.
Q: How is the appetite for your paper from mutual funds?
A: I think more than the mutual funds, we already have a good set of investors as we have now discontinued the unlisted NCD. So there are a lot of direct customers already with us and they are also all joining in the listed entity bandwagon.
Q: The exposure you have to mutual funds, what has been their appetite?
A: I think the issue is only one day old. It has started only yesterday. I am sure if mutual funds may come, if they come well and good, even without them also this Rs 300 crore will be a walkthrough.
Q: Typically, what is your yield on funds?
A: Yield on the funds we borrow is about 12.5 percent.
Q: What do you make when you lend to your borrowers?
A: 19.9-20 percent.
Q: What are your future NCDs which are lined up besides this Rs 300 crore because this would be a fifth NCD?
A: We may go for another NCD once this is done. The price will depend on how the appetite for the business also grows because last one year almost growth was flat. If we see better growth prospects, we will come out with a bigger issue o NCD also.
Q: How was the AUM in the current quarter in the last three months?
A: Last three months, it has been stable. It is about 26,000, it still continuing with 26,000. Maybe half a percent deep or half a percent more in this quarter, you can say it is almost stable.
Q: The NPL performance?
A: NPA was just 2 percent last time. This quarter it should be around that or little lesser.
Q: How have trends moved in terms of disbursements because of the hike in gold prices is there far more interest coming in. Hence could we see your auctions seeing a lot a greater amount of realisations than the previous quarter?
A: On all these aspects which you said, it is much better. As I said first, because the luster for the gold and the demand for gold among the people also is there.
So they are not abandoning many loans now and the auction also is lesser. During the auctions also, the price is high, definitely we get better realisation and probably better realisation will have an impact on the profits also.
Q: There were rules requiring you to make fuller disclosures when you go for publicly listed NCDs. This one qualifies for that rule. You will have to make more disclosures?
A: All the usual disclosures are there for this also.
Q: Are these fully collateralized these debentures?
A: Yes. All the debentures are secured NCDs. We have one which is six years doubling which is unsecured otherwise of the 11 options, 10 options are secured.
Q: Are you offering that doubling in six years now?
A: Yes, it is there.