Muthoottu Mini looks at 45% loan growth this fiscal

Kochi-based mid-sized gold loan player Muthoottu Mini Financiers is looking to grow its loan sales by over 45 per cent in this fiscal as it embarks on a faster expansion and also increasing per branch productivity as the economy returns to near normalcy from the Covid-19 pandemic. Job losses due to the first three waves of the pandemic and the subsequent pick-up in economic activities have been driving demand for gold loans from individuals for personal requirements and small businesses for working capital, coupled with a massive spike in the bullion prices since the pandemic hit the world in March 2020.

Muthoottu Mini, hailing from the Muthoot group, closed FY22 with over 25 per cent growth and an AUM of Rs 2,500 crore, which grew from Rs 1,994 crore in the previous fiscal.

The larger group entity Muthoot Finance is a listed company with over Rs 65,000 crore of AUM, up 11 per cent from FY21, while the other one Muthoot Fincorp is the third-largest player with around Rs 10,000 crore of live loans and the No 2 Manappuram Finance grew 11 per cent in FY22 to Rs 30,300 crore. Muthoottu Mini had an average loan growth rate of 22 per cent in the three years to FY21, and 25 per cent in FY22 and hopes to add 45 per cent more new customers this fiscal. This industry normally counts only fresh loans as loan sales and not pledge renewal.

Muthoottu Mini Managing Director Mathew Muthoottu told PTI that he expects new loans sales to clip at 45 per cent this fiscal. ''From an AUM perspective we are looking at Rs 4,000 crore by March next, which is 60 per cent more than its FY22 AUM of Rs 2,500 crore, aided by the ongoing massive expansion under which it will open 170 branches this year, taking the branch footprint to close to 1,000 by the end of March next.'' He said most of the new branches will come up in Gujarat, Maharashtra, Haryana, Delhi-NCR and Andhra-Telangana.

According to Krishnan Sitaraman, a senior director with Crisil, gold loans will continue to be a sought-after asset class given its ability to offer immediate liquidity and also because of lenders' cautiousness about growth in many other retail asset classes. Last year organised gold loan industry grew around 22 per cent but India Rating expects this to halve this year to 11-13 per cent on the fall in gold prices, which directly affects the loan-to-value ratio for a customer.

According to Jinay Gala, an associate director with India Ratings, the growth of gold loan NBFCs depends on gold price movement and given the more or less stable price movement. ''We believe the sector to grow in the range of 11-13 per cent for large players but smaller ones could still see volume-based growth, he told PTI. The agency has stable outlook for the sector for FY23.'' Muthoottu Mini Chief Executive PE Mathai said with the recent rating upgrade to A- they hope to tap more growth capital from banks.

Explaining the rationale for bullish growth outlook, he said, with branch expansion and rating upgrade, they expect to sell more. Also, they want to massively increase per branch productivity which is only Rs 3.2 crore now, while rivals have more than double of this. Earlier with low ratings, it was difficult for us to get capital from banks which is cheaper than market borrowings. But now with better rating we can raise more money from banks. Till now we have been raising money from the market mostly through NCDs and on-lending only worth the funds raised, Mathai said.

Their market borrowing through NCDs stood at Rs 1,600 crore in FY22 and bank loans at Rs 1,005 crore. We want to make the funding source equal from this year and hopefully, the rating upgrade should help, Mathai said, adding funding from just seven banks till a few years ago, currently they have relationships with more than 20 banks now.

The company serves over 4 lakh customers and has 10 tonnes of gold under custody now. Last year, it added 1.7 lakh new customers and the same stood at 55,000 this year so far.

The company has over 830 branches spanning the home state of Kerala, where it has 170 branches, Karnataka, Andhra, Telangana, Tamil Nadu, Pondicherry, Maharashtra, Goa, Delhi, Gujarat and Haryana and are manned by around 4,000 employees.