Home loan book to be Rs 500 cr in two years: Muthoot Finance

Muthoot Finance will try to maintain its operating margin around 9 percent, Managing Director, George Alexander Muthoot tells CNBC-TV18.  The company had earlier guided for a 10-15 percent AUM (assets under management) growth in FY17. But Muthoot says that if the strong performance continues, it may report better numbers.The company has diversified into housing finance with assets under management currently at Rs 44 crore."But going forward, we should see about Rs 500 crore (housing finance) and Rs 1,000 crore of gold loan portfolio in the coming two years," he says.Muthoot has also acquired a microfinance company, Belstar Investment and Finance. Muthoot holds 46 percent stake now, but another 10 percent will be acquired in a month.Below is the transcript of George Alexander Muthoot’s interview to Anuj Singhal and Latha Venkatesh on CNBC-TV18.Latha: Very good set of numbers. Can you maintain this space of assets under management growth (AUM) and income growth?A: Yes, I think so because I feel that what we have seen in the last two quarters, last quarter of last year and the first quarter of this year, the AUM growth has been good and we have seen good offtake of the gold loan in the market. Same thing with the profits also and the incomes also. We see interest collection, whatever steps we have taken in the last one year to streamline the interest collection and maybe sensitise our customers to pay interest constantly, regularly, etc. is paying dividends now. That is why we see more income coming into the company now.Anuj: What is the word on margins because this quarter was a pleasantly positive surprise for the market.A: Yes, margins are also good. We try to keep the margins around 9 percent plus or minus half a percent point. That is what we are trying to do and we have been reasonably able to do that in the last two or three quarters.Latha: Anything else that you are going to diversify into or will you be a largely gold loan guy?A: We have diversified slowly. We have diversified into the home finance and we have started our own home finance company which is now very small. The AUM is just Rs 44 crore. But going forward, we should see about Rs 500 crore and Rs 1,000 crore of gold loan portfolio in the coming two years. And we have just acquired a microfinance company, and today we hold 46 percent in that company. Another 10 percent more is being acquired in the next one month. It will take our holdings to 57 percent. Latha: The big trend going in your favour is of course, this wholesale money crashing practically. You are getting money for the asking. Are you going to renew or probably sell off some of your old debentures, replace it with cheaper debentures? Basically, what is the cost of money likely to fall by?A: Our retail debentures are mainly retail debentures for one year, two years, three years, etc. It has always been priced not very high, but we would not be thinking of repricing them or paying it before maturity and then taking new ones. But of course, the interest rate which you see now, I do not think it is permanent. It is only a temporary phase and for us, stable funding comes from the banks as well as the retail debentures.Latha: But your cost of money has fallen. By how much?A: It would have fallen by about 50 basis points, that is all, in the last quarter. 50 basis points, that is the maximum it would have fallen.Latha: And you expect an AUM growth of 5 percent again? What is the target for the year?A: We had given a guidance of 10-15 percent AUM growth as well as profit growth in 2016-2017 year. We are on track to do that and probably if things go as we are seeing now, probably we may be able to do better than that.