Muthoottu Mini may enter MSME and two-wheeler finance in 2025, says MD

Muthoottu said that post Covid-19, banks have been going aggressive in gold lending but traditional players have a strong hold in the segment.

Kochi-based Muthoottu Mini Financiers may foray into MSME (micro, small, & medium enterprises) and two-wheeler finance in 2025, said the company’s Managing Director Mathew Muthoottu.

Additionally, the company plans to grow its assets under management (AUM) to Rs 7,000 crore by 2027, from Rs 3,200 crore currently, Muthoottu said.

“We want to grow our AUM and achieve the targets we have set for the next few years and hold a strong gold loan portfolio. We may also look to enter the MSME and two-wheeler financing business in 2025,” Muthoottu said in an exclusive interaction with Moneycontrol.

The company, Muthoottu said, is also into insurance, money transfer, etc., and will continue to focus on these.

Competition

Traditional gold loan providers like Muthoottu Mini, Manappuram Finance, and Muthoot Finance have been facing tough competition, mainly from banks.

Also read: Banks go aggressive on lending against gold; register 23 percent YoY growth

Banks, including those with a strong base in the gold loan business, like CSB Bank, South Indian Bank, Federal Bank, etc., have been aggressively ramping up their gold loan portfolio.

In the April-June FY23-24 quarter, Canara Bank registered 29.37 percent growth and Bandhan Bank reported 32.08 percent year-on-year (YoY) growth in gold loans.

The Reserve Bank of India’s (RBI) latest sectoral credit data showed that bank loans against gold jumped to Rs 95,746 crore in July 2023 from Rs 77,785 crore in July 2022, a 23.1 percent spike, compared to a 6 percent increase in the year prior.

Muthoottu said that post-Covid, banks have been aggressive in gold loans, but traditional players have a stronghold in the segment.

“Banks have several services other than gold loans. But traditional players like us are primarily into gold loans, where we have a strong base, which helps us service the market properly,” Muthoottu explained.

Why expand to other segments?

Muthoottu said that after the lender achieves its AUM target of Rs 7,000 crore by 2027, it may look at expanding into other segments. In the coming quarters, branch expansion and digital investments are some of the areas the lender plans to work on.

Also read: NBFC-MFIs' assets under management to see up to 30% growth in FY24: Crisil

“We plan to open another 50-100 branches in FY23-24 and take our network to around 950 branches. Additionally, we are hoping to up our average revenue per branch to Rs 4-5 crore, from the existing Rs 3 crore,” Muthoottu said.

On the digital front, the company has minimum presence. “As a traditional gold loan provider, we have a customer base that is comfortable with our in-branch services. But we plan to invest in our digital services and work on providing customised services too,” Muthoottu added.

Regarding the expansion plans, experts said other than competitive intensity, traditional gold loan providers have also been experiencing declining growth.

"Traditional and legacy lenders had good growth in the last decade. But in the past few years, banks have been aggressive on gold loans, which impacted the profit of the legacy players,” said Sudhakar Prakasam, Director, BFSI, CareEdge, a ratings agency.

Additionally, Prakasam highlighted that players like Manappuram and Muthoot Finance have started to diversify into businesses like microfinance (MFI), insurance, etc.

“Manappuram grew their microfinance portfolio by around 20 to 25 percent in the last few quarters, and Muthoot increased its stake in Belstar Microfinance this year,” said Prakasam.