Financial year 2014-15 has started off on a good note for gold loan non-banking finance companies (NBFCs), with the RBI easing certain stringent regulations, says MG George Muthoot, chairman of Muthoot Finance.
He pointed out that the central bank had recently increased the cap on loan-to-value (LTV) on gold jewellery to 75 per cent from 60 per cent.
This would mean that the gold loan companies can now lend up to 75 per cent of the value of the pledged gold.
Muthoot said the RBI, by raising the LTV cap, had also created a level-playing field for the NBFCs. These measures echoed the RBI’s confidence in gold loan NBFCs, he told reporters.
Muthoot said the asset value of his company, which had come down to around ₹22,000 core, would jump back to the previous peak of ₹26,000 crore by the end of the 2013-14. “We are lucky in terms of regulations this year and I want to thank RBI Governor Raghuram Rajan for the quick decisions on lending cap.” All gold loan companies stand to benefit from the relaxations.
Turnover Muthoot Finance’s turnover is likely to increase by 25-30 per cent in the coming fiscal on improved outlook for the sector. He urged the RBI to extend the benefit of priority lending to gold loan companies, too. He claimed that gold loan companies had helped rural borrowers, such as farmers, to avail of finance at much lower rates, compared with informal lenders.
“Wherever we have branches, we have been able to ‘finish’ money-lenders as we could go to the last mile and provide cheap credit.”
Muthoot would set up its first set of ATMs on February 4 in Kochi and Delhi. By March, the number of ATMs would rise to 100 and by the end of the year to 1,000. The company had been permitted to set up 9,000 ATMs in three years.
As part of its diversification strategy, the Muthoot Group, which already had 16 business divisions, would soon launch a housing finance wing and also enter the insurance sector.
It had recently acquired a resort hotel in Costa Rica, as part of increasing its involvement in the hospitality sector. Currently, the group has five hotels and resorts in Kerala.
Net down to ₹194 crore
Gold loan major Muthoot Finance has reported a net profit of ₹194 crore in the third quarter of financial year 2013-14. This is however, down from ₹211 crore reported in the second quarter. The company recorded a total income of ₹1,201 crore and profit before tax of ₹298 crore. Earnings per share stood at ₹5.23, down from ₹5.67 in the past quarter.
The company’s profit after tax year-on-year fell 24 per cent during the quarter. The Chairman of the company, M.G. George Muthoot, said the Reserve Bank relaxing the LTV (loan-to-value) cap to 75 per cent from 60 per cent earlier, came as a major relief to all gold loan NBFCs in the country.