Muthoot Finance expects over 15% AUM growth after Q3 and Q4: George Alexander Muthoot
We have already grown by Rs 1,300 crore of portfolio in the last six weeks.
What is the demand outlook for gold loans?
This quarter (Q3), the last one-and-a-half months have been extremely good. We have already grown by Rs 1,300 crore of portfolio in the last six weeks. So, in Q3 and Q4, we see much better demand and we are also able to lend much better in these two quarters. So, probably by the end of the year -- after Q3 and Q4 -- we should see a minimum 15% growth or little more growth on AUM by the year end.
There were some liquidity constraints in the second quarter with LTV dropping sharply as well. What were the challenges? How did you get past them and what really lies ahead now? Will growth be a problem?
Q2 was a little difficult with regards to liquidity because banks were basketing us also with all the other NBFCs, whereas gold loan NBFCs are separate because we do not have an NPA issue, we do not have liquidity issue. But unfortunately we were all clubbed together.
In fact I am requesting the regulators to have a separate classification for gold loan NBFCs. But to tide over that, we have done two issues; one issue of retail NCDs where we collected Rs 460 crore two weeks back and another NCD retail is also coming up for a like amount in the next 10 days.
Along with that we also went for the external commercial borrowings of $450 million which we received 10 days back. So, the overall liquidity is quite comfortable now and banks have also started just giving us little more growth capital in the last two weeks. So in the next two quarters, we do not see any liquidity issue at all and could grow very well.
In an attempt to diversify the borrowing profile, tell us a little bit more about the funding avenues you have tapped and how much you availed of overseas as well?
So far, we have Rs 36,000-crore book. Of that, Rs 10,000 crore is our own capital, the rest Rs 26,000 crore is the borrowed funding. Out of that, 50% today is bank funding, another 25% should be from our NCDs and probably about 16% of the borrowing should be from the CPs, etc. We bhave now introduced or brought in a new avenue for borrowing which is the external commercial borrowing (ECB) which has seen very good response because although our issue size was Rs 450 crore, the demand came up to $1,200 million. Out of that, we were able to allot $450 million only. We see good demand for the paper overseas and it is also listed in the London Stock Exchange.
How are you observing the weight behind pricing power? What is the kind of projection you have in terms of your spreads going forward?
Usually we expect the spread to be around 12% but last quarter, we had a little better spread of about 14%. It was mainly because we had increased our lending rates three months back and the impact of that is there.
Secondly, because if the increase in the gold price, for the NPAs in our books which got released or closed, we were able to fetch much better interest because NPAs fetch us more interest and there are more penal charges. We were able to collect all the penal charges. So the realisations were better and that is why last quarter, the interest spread was 14% but going forward, we should see around 12% to be a stable interest rate spread.
Now that the NCD bonds are all online , we do not need too much of branch presence in Kerala.
-George Alexander Muthoot
Could you give us a view on how local banks are reacting with respect to rationing the quantum and pricing the RM via lending?
The local banks, local NBFCs if you are asking about the gold loan part of it, are also doing gold loan lending. But if you are asking about the pricing for Muthoot, we have not reduced the prices in the last seven-eight months. We have only increased the borrowing cost to us by about 100 bps. They have still not started reducing it, but they have started releasing more funding now.
What is the situation in Kerala? You have seen quite a few branch shutdowns. In terms of the overall scheme of things, how much is going to really affect your business?
The Kerala business is only 3.2% of our total business. Although we started in Kerala, in the last two decades we have branched out to all parts of India and today Kerala lending business is only 3.2% of our total portfolio. As we grow 15% every year, so 3% in Kerala is not an issue. We had about 800 branches in Kerala. In the last two ,years we have scaled it down to 600. It was because the lending aspect in Kerala is much lesser. Kerala is more of an NCD market for us.
Now that the NCD bonds are all online , we do not need too much of branch presence in Kerala and that is why we are closing or scaling down the branch operations in Kerala.