Expect asset growth to be muted in FY13: Muthoot Finance

Muthoot Finance has reported its fourth quarter results. The company has reported a 69% jump in the March quarter net profit at Rs 235 crore, up from Rs 139.32 crore in the year-ago period.

George Alexander Muthoot, managing director of Muthoot Finance says, this year the asset growth may be little muted due to some regulatory overhangs. However, he says, the company would try its best to maintain the profitability. In FY13, he says, the company will add around 250-300 branches. Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying video. Q: It’s been a strong quarter for you, up 71% in terms of income from operations and profitability is up around 69%. Can you give us a sense on what exactly took place in this quarter? What would your guidance be for FY13, considering that there is some amount of regulatory overhang that the gold non-banking financial banking companies (NBFCs) are suffering from? A: There are some regulatory overhangs. So, probably this year our asset growth may be little muted. We will be having a muted growth in this year, specifically asset growth. But we would try our best to maintain the profitability. We already have 3,700 branches in the country and they are well distributed. This year our branch expansion may be little lesser, 250-300, only in some strategic places and under presented area because we are fairly well represented all over the country today. Q: Assets under managements (AUMs) have risen by 55% year-on-year. Can you give guidance on that? A: Next year, we may think of only about 10% to 25%. The range should be in 10-25%. Ofcourse one should also understand that the base has also gone up in the last one year. Q: But that is a huge range. Can you narrow it a bit? A: Yes, it also depends on the regulatory overhang also which is there. But with little more comfort coming from the regulator, the range can be from 10% to 25%. Q: What about net interest margins? They have shown only a minor reaction from 11.5%, it’s come down to around 10%. What exactly is the net interest margin for the Q4? Where is it headed? A: We expect the net interest margin also may come down by about 1% or so Q: How much is it in the Q4? What may it come down to? A: In Q4, the net margin would have been about 9.66%. Going forward, it may come down by 1% or little less than 1%. But we are trying our best to also reduce the expense. The expenses are about 4%. We would try to reduce it, we have already reduced it by about 0.25%. Q: Is there a pressure on quality of assets? A: No, there is no pressure. Q: I am quoting your numbers, it is 0.56% compared to 0.29%. A: Those are just overdue loans, more than 18 months, they are not loss assets. Our loss assets are what we write off. Gold is with us, it is 100% secure. Q: Can you give us some guidance with regards to a percentage increase for FY13? In FY12, you did 97% on the top-line and 80% on the bottom-line. Can you give us a sense in terms of a range because you are expecting some amount of slow growth? A: On the bottom-line range, we should do little better than this. But I wouldn’t like to give guidance on the profit at this point of time. We will definitely do little better than the present. Q: At the moment, the new securitisation rules kind of discourage direct bilateral sales of loans. They are only encouraging securitised paper. Will that impact your cost of money; will you get little less through this route? A: No. The problem came a year back and we have learnt to live with it; we have learnt to live without securitisation.