Expect loan book to improve going ahead; net up: Muthoot

George Alexander Muthoot, MD, Muthoot Finance, says that the company saw a marginal increase in the net profit. He is also of the view that the loan book of the company will improve going forward.

Below is the edited transcript of his interview to CNBC-TV18.

Q: Your top-line numbers have exhilarated the market. It is better than the second quarter. Your total income stands at Rs 1,300 crore compared to Rs 638 crore, but your profit has not grown. It is flat from second quarter levels. Can you explain this?

A: In the previous quarter profit was Rs 251 crore and today it stands at Rs 270 crore. In the second quarter our profit was Rs 269 crore. 

Q: It is very marginal, it is flat?

A: Yes, we were passing through difficult times.

Q: Your income has gone up considerably?

A: No, it has not gone up considerably. In the last quarter the income was Rs 1,299 crore, today it is Rs 1,363 crore.

Q: Can you give us an indication of what Net Interest Margins (NIMs) you have done this time around? Last quarter I think it was at 10.6 percent?

A: I think it was always around between 9.5-10 percent, now it stands around 9.6 percent.

Q: Can you give us some indication of whether bankers are increasing lending to the sector and what do you expect to do in terms of loan growth levels? Where could they return to on an annualized basis?

A: In this quarter, we have been able to grow our loan book by Rs 1,969 crore, the loan growth was not good in the first two quarters, but now in this quarter the loan growth has been good. Probably, in the next quarter also we should be able to do better and end the year with about 10 percent compared to last March.

Q: You expect your AUM to grow by 10 percent is it?

A: Correct.

Q: There has been a static behaviour in gold prices. We have not seen the price go up for a better part of 2012. If anything from the peaks it is down by maybe 10 percent. If 2013 were to be a flat year for gold prices would you expect that to impact business?

A: No, I do not think it should impact the business. The gold price is not the determining factor as to why people should take a gold loan. People take gold loan because they need money quickly and at their doorsteps. If the price is going up, people may sell the gold, but for taking a loan it is not at all dependent on the price of the gold.

Q: Are you experiencing any of your customers moving to the unorganized moneylenders in search of higher Loan-To-Value (LTV) etc.?

A: In the first two quarters we witnessed the trend when there was no clarity on regulatory issues. Some customers moved to banks and some to money lenders. But, now we are better placed and post KUB Rao Committee report, we will see the customers coming back from the unorganised to the organized sector.  

Q: Did you do any calculations of the KUB Rao Committee report? Although they have increased the LTV, they have given very specific instructions on how you should calculate value itself removing the stone value, removing the making charges. So net-net are you going to be able to lend more for a given piece of ornament?

A: I do not think. The net impact will be nil or the same that we are following. The net effect will be almost the same.

Q: You mentioned that the loan growth or the AUM growth would be 10 percent going ahead. Last quarter you saw about a 13 percent YoY growth. Is there any sluggishness that you are hoping to see in the quarter?

A: No, we just wanted to be very conservative.

Q: This is the guidance that you have slated for FY13?

A: The overall business sentiment has improved; the sector is witnessing much better sentiment. The loan book growth should improve in next quarter.

Q: You expect that in FY14 you would do better than 10 percent?

A: Yes, on profit base certainly we should do better.

Q: On AUM basis?

A: AUM also we should do well, 10 percent better.