Kerala-based gold loan major Muthoot Finance has said the share of its non-gold business may reach 20% to 25% of the total assets under management in next five years from the current 12%.
The contribution of its subsidiaries to the overall consolidated assets under management (AUM) improved slightly to 12% in the third quarter of the current fiscal and going ahead the company expects the share of non-gold AUM to gradually rise.
Muthoot Finance MD George Alexander Muthoot told FE that it does not mean that the company is taking its focus off the gold loan segment.
“It means that others are growing and we have segments such as home loans, personal loans and micro finance loans,” he said.
According to him, despite the muted growth in gold loan space, the company expects to clock a double digit growth of 10% in gold loan in FY’24.
The gold loan segment has been seeing demand revival in the months of January and February so far and it will close the current fiscal at a loan growth rate of 5%. In spite of the challenges, efforts by the NBFC sector have increased the visibility of gold loans as a safe and secured lending product.
“In December 2022 itself, the company started seeing growth in gold loan and the trend was followed in January and February. Now, it may be flat, but at the end of the current fiscal, we will be able to see a 5% growth,” he said.
Further, the company has undertaken some aggressive marketing and advertising measures and coupled with increased demand, it expects to see a double digit (10%) growth in gold loan in FY’24.
He said the company’s net interest margin (NIM) has always been between 10% and 11% and going forward it will maintain the same level. With the bank’s interest rates going up, the company’s borrowing cost will also become costlier.
“Obviously, our borrowing cost will go up, but we will maintain our NIM by increasing our lending rates,” he said.
According to analysts, Muthoot Finance’s yields improved 85 bp q-o-q consequent to the company discontinuing ultra-teaser rate gold loans. Spreads expanded 80bp q-o-q, driven by improvements in yields.
It continued teaser schemes and the loans were migrated to higher interest rates with effect from July 22.
George Alexander said, “Now, ultra-low teaser loans are behind us and the yields are staying at 19% to 20%. I think we should be able to maintain that level,” he said.
Muthoot Finance registered a consolidated net profit of Rs 934 crore for Q3FY23 as compared with Rs 1,044 crore in the corresponding quarter of last fiscal, posting a decline of 10.5%.
Consolidated income of the company dropped by 4.3% at Rs 3, 030 crore as against Rs 3,168 crore. Consolidated loan assets under management increased to Rs 65,085 crore, up by 7% ,y-o-y, as against Rs 60,896 crore in same quarter last year.
