As gold regains sheen, Muthoot Fincorp eyes 25% jump in volume

With gold prices firming up, the country's second largest gold loan company Muthoot Fincorp is aiming to achieve over 25 percent growth in topline business with a disbursal target of Rs 19,000 crore this year.

To further tap emerging business opportunity, Muthoot Pappachan Group-run company has also launched a special gold loan scheme called SME Gold, and has set a disbursal target of Rs 600 crore in the first year of operations, Group chairman and MD Thomas John Muthoot told PTI.

The group, with its four credit verticals -- Muthoot Fincorp (gold loans), Muthoot Capital(2-wheeler loans), Muthoot Microfin (MFI) and Muthoot Housing (affordable housing) -- has also set a disbursement target of Rs 25,000 crore this fiscal, up from Rs 18,000 crore in 2015-16, Muthoot added.

Out of this Rs 25,000-crore, they hope to achieve gold loan disbursement of Rs 19,000 crore as against Rs 15,000 crore last year.

Besides, the group aims to take microfinance book to Rs 3,000 crore this year from over Rs Rs 2,100 crore last year, two-wheeler loans to Rs 1,200 crore, from Rs 1,000 crore and the recently launched MSE lending to Rs 600 crore, Group Director George Muthoot said.

He also said they are in advanced talks with foreign private equity funds to raise around Rs 500 crore for microfinance business as it looks to broaden its diversified lending portfolio with more consumer-centric products and de-risk itself from the impact of volatile gold prices.

The fund-raising in microfinance business is expected to conclude within a couple of months and the funds will be utilised for business expansion.

The transaction will help the company more than double its asset book from the current Rs 2,100 crore to Rs 5,000 crore in two to three years.

"The focus on microfinance and the auto financing is part of our strategy to diversify our asset basis and de-risk ourselves from volatile gold prices," George Muthoot said.

He said that from just being a two-wheeler financier, the group will be entering car/used car financing as well shortly.

The measures to de-link from gold price fluctuations will ensure that the impact on bottomline will be lower than in the past, if gold prices head south again.

This coupled with favorable sectoral dynamics, renewed customer engagement and growth through product diversification will ensure a sharp uptick in return ratios of gold loan NBFCs over the next few years, says a recent report by Antique Stock Broking.

"We are diversifying ourselves as a full-fledged financial services firm. We will be completing the portfolio diversification in its full measure and then plan for an IPO," he said.