6 hours Ago
"I see this in parallel with what happened during the COVID time when banks, everybody was reluctant to lend money on unsecured loans, that time also gold loan played a great part," says George Alexander Muthoot , MD, Muthoot Finance . The biggest talking point this quarter was actually your guidance because you have revised your gold loan growth guidance from 15% and up 25%. What is giving you this kind of confidence given that the RBI has now lifted the ban of course on one of your competitors? George Alexander Muthoot: The last two quarters was also good.
Quarter one was good, Quarter two was also good and we have already grown by 16%. So, we felt it was reasonable that the year should end with around 25%, that is why we have given a guidance of 25%. This quarter also things are looking good.
One of the main reasons I feel is that the last two-three quarters there has been a lot of cautions coming from RBI with regard to unsecured loans. All the fintech loans, unsecured personal loans, etc, by banks and finance NBFC. So, there has been a little sluggishness in the growth of the unsecured loans both in the NBFC as well as in the banks and customers definitely need money and gold loan certainly has come back to them as definitely a good option.
I see this in parallel with what happened during the COVID time when banks, everybody was reluctant to lend money on unsecured loans, that time also gold loan played a great part. And we felt that we were doing a good service to the community by making funding available. It is exactly the same thing which is happening now also.
Consequently, our gold loan portfolio is also growing. Stock Trading Point & Figure Chart Mastery: A Comprehensive Trading Guide By - Mukta Dhamankar, Full Time Trader, 15 Years Experience, Instructor View Program Stock Trading Commodity Markets Made Easy: Commodity Trading Course By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Market 104: Options Trading: Kickstart Your F&O Adventure By - Saketh R, Founder- QuickAlpha, Full Time Options Trader View Program Stock Trading Futures Trading Made Easy: Future & Options Trading Course By - Anirudh Saraf, Founder- Saraf A & Associates, Chartered Accountant View Program Stock Trading Complete Guide to Stock Market Trading: From Basics to Advanced By - Harneet Singh Kharbanda, Full Time Trader View Program Stock Trading Advanced Strategies in Stock Market Mastery By - CA Raj K Agrawal, Chartered Accountant View Program Stock Trading Stock Valuation Made Easy By - Rounak Gouti, Investment commentary writer, Experience in equity research View Program Stock Trading ROC Made Easy: Master Course for ROC Stock Indicator By - Souradeep Dey, Equity and Commodity Trader, Trainer View Program Stock Trading Technical Trading Made Easy: Online Certification Course By - Souradeep Dey, Equity and Commodity Trader, Trainer View Program Stock Trading Dow Theory Made Easy By - Vishal Mehta, Independent Systematic Trader View Program Stock Trading Stock Investing Made Easy: Beginner's Stock Market Investment Course By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Cryptocurrency Made Easy: Cryptocurrency Course By - elearnmarkets, Financial Education by StockEdge View Program Stock Trading Derivative Analytics Made Easy By - Vivek Bajaj, Co Founder- Stockedge and Elearnmarkets View Program Stock Trading Ichimoku Trading Unlocked: Expert Analysis and Strategy By - Dinesh Nagpal, Full Time Trader, Ichimoku & Trading Psychology Expert View Program Stock Trading RSI Trading Techniques: Mastering the RSI Indicator By - Dinesh Nagpal, Full Time Trader, Ichimoku & Trading Psychology Expert View Program Stock Trading Heikin Ashi Trading Tactics: Master the Art of Trading By - Dinesh Nagpal, Full Time Trader, Ichimoku & Trading Psychology Expert View Program Stock Trading Market 101: An Insight into Trendlines and Momentum By - Rohit Srivastava, Founder- Indiacharts.com View Program How much of your guidance is a function of pure uptick in gold prices because if gold prices go higher, the guidance number will also go higher? George Alexander Muthoot: No, because the guidance number mainly is based on the demands.
The demand is there, that is what I said. The demand is there because unsecured loans are not easy for many people or for some people. Those without some good credit rating and those without salary, etc, unsecured loans become more difficult today and that is the sector we are actually catering to.
It is definitely a good service. Having said that, exactly the price in the last three-four months or last six months has gone up by about 15%. It has helped to some extent.
But people borrow only what they want. Just because the price has gone up, everybody does it. It is not a commodity.
It is the ornaments which they are giving. So, it is not a commodity on which you take maximum and leverage yourself. There are people who need more money.
They definitely will be helpful. But more than that, the gold price definitely makes our collateral much stronger. Because today, our average LTV on the books we have lent is not even 75.
It is only 68%. So, on the total portfolio, only 68% is the loan outstanding. So, it makes our product or gold loan portfolio definitely stronger.
And you have also said that you have given more time to consumers to repay the gold loans instead of auctioning gold as a collateral. Can you tell us a little bit more about how this works? Is it a one-off? Are you going to do this every quarter? And how many such accounts are there where more time has been given? George Alexander Muthoot: See, when the loan is given for one year and thereafter, it is treated as an NPA after 90 days. So, when it becomes an NPA, the option for us and the customer has not paid the interest or closed the loan, it is for us to ask him to do it and if he is not doing, then go for auction.
So, in that way, we can have our NPA as zero. But you will see our NPA has always been on the higher side. It was 3.
2 two quarters back. Then, it became 3.98.
Now it is 4.3. But all these accounts are 110% fully with principal and interest, it is fully secured with gold which is literally a liquid collateral.
See, customers come to our branch. They see the price also going up. They do not want to lose that ornament.
So, they come and request the branch, please give me two months' time more, three months' time more. And then we accede to the request and because of that, the NPA percentage is going up. But certainly, we are helping them.
And we are able to avoid an auction. So, if we had not sold this, we would have had to auction maybe 4% of our portfolio, that is about 3,000 crores we would have had to auction. It is a pity.
It is unfair to the customer. We have to refund money because the gold price has gone up. The money we get after auction is much higher than what is due from it.
So, we will refund the money. And it is a pity. Somebody's very valuable ornaments, which is a family's ornament or wife's ornament, we are selling it so that is a consideration we have.
And probably we are a little slow on that. We carry this in our books. Many companies do not carry so much of NPA in books.
When we carry NPA, we do not recognise the interest, etc. It is a hit on our profit and loss for some time. But when it is closed, we get it.
But finally, all these customers take back if they get three, four, five, six months' time more. So, all the NPAs which you see now, they all turn around. By sixth month, a new set of NPA comes.
It is not the old people. It is not an NPA which is coming there for the last two-three years. No.
They come. When they get more time, they take it back. Another set of customers come and we are able to accommodate them in the books.
The depth of our balance sheet and profit and loss account can carry this as NPA, still report a good profit for the company. So, what kind of guidance for your NPA can you give us at this point in time? George Alexander Muthoot: I think it will be almost just a 4% around. It will be around the 4% really.
We would now maybe persuade the customers more and more to pay the interest and relieve the loan or take back the loan, etc. So, we cannot go beyond this 4.5% or 5% because it will look very bad on our balance sheet.
Although there is no loss, it will seemingly look very bad. I also want to understand what is happening within your microfinance business. Your profits in microfinance have actually gone down by 37%.
There has been an AUM degrowth as well, and NPAs also have increased. What exactly is happening within the MFI business? George Alexander Muthoot: See, MFI, nothing special or particular or special for Muthoot as it is the same which is happening to the microfinance industry. Actually, RBI has put some cautions on this and the whole microfinance industry, last two quarters have not grown.
We have also not grown. Last two quarters, it is actually flat. It is going flat really.
So, that is the impact you are seeing. The NPAs have also gone up. It was about 2.
35%. Now, it is 3.5%.
So, it is the same for every microfinance. Microfinance industry every five, six years go through such a phase. It is a phase in the business of microfinance.
It goes after some time, maybe two-three quarters later things will settle because people definitely need money and this is a good way for putting purchasing power in the hands of people. So, maybe we wait for two-three quarters more and then when things go up, it will also go up. Again, repeating, we are definitely a tad above many of the other microfinance, in NPAs, in profit, etc, we are definitely better off.
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