Muthoot Finance expecting robust gold loan growth, credit card foray this fiscal: MD

Kochi-headquartered Muthoot Finance is aiming for 12-15 percent growth in gold loans (advances against pledged gold articles) in the current financial year as the economy slowly recovers and small businesses open up, the company’s managing director George Alexander Muthoot told Moneycontrol on May 27.

The gold loan-focused non-banking financial company (NBFC) on May 26 reported its FY22 numbers, recording a net profit of Rs 3,954 crore, up 6 percent year-on-year (y-o-y). Gold loans grew 11 percent y-o-y to Rs 57,531 crore as on March end, while overall advances grew 10 percent y-o-y to Rs 58,053 crore.

Muthoot said the NBFC missed its annual growth target of 15 percent in FY22 due to gold auctions in the last two quarters but sees growth coming back in the absence of legacy accounts.

“Demand will start increasing. Small businesses are still opening up and bigger companies are doing more business now. We feel FY23 should be a good year for gold loans,” Muthoot said.

Apart from gold loans, Muthoot Finance’s wholly owned subsidiary Muthoot Homefin (India) will likely disburse Rs 600 crore of home loans this fiscal, the MD said.

“…In last six-seven quarters we have not done much of lending but in the last one quarter we have started, so probably this year we would like to give incremental housing loans of Rs 600 crore,” he said.

As of March end, Muthoot Homefin’s total loans stood at Rs 1,470 crore, 14 percent lower on year. Its gross stage-3 or non-performing assets reduced to 2.10 percent at the end of March from 4 percent as on March 31, 2021.

Capital raise

In order to sustain growth and as part of servicing liabilities on an ongoing basis, Muthoot Finance will likely go for three or four more public issues of non-convertible debentures (NCDs) this fiscal, the MD said. Each will be Rs 300-400 crore, he added.

“Last year we went more for corporate NCDs and we did not go to the retail sector very much. Prior to that, four or five years back, we used to go to the retail sector also,” Muthoot said.

The company on May 24 had separately said it was raising up to Rs 300 crore through secured redeemable NCDs.

As on March 31, Muthoot Finance’s capital adequacy ratio stood at 29.97 percent.

Credit cards

Muthoot Finance is waiting on the Reserve Bank of India (RBI) to provide an in-principle approval to launch its credit card, the MD said. The NBFC has 63 lakh active customers and it will tap this base for its card, Muthoot said. “We do not see any reason why it should be delayed,” he added.

The comments follow the RBI’s April 21 diktat that NBFCs can offer their own credit cards if they receive regulatory approval first and have a certificate of registration.

For co-branded cards, the RBI said the role of the co-branding partner will be limited to the marketing and distribution of the cards. Additionally, the co-branding partner shall not have access to information related to transactions undertaken on the card.

This has allowed NBFCs to offer their own credit cards. Moneycontrol on May 4 exclusively reported that Mahindra Finance is exploring the possibility of launching a credit card for its customers and employees. The Shriram Group too has not rejected the idea of issuing its own credit cards.