Muthoot Finance reported a stable set of Q1 numbers with net profit surging 48 per cent to ₹270 crore. The average loan per branch has gone up, the number of loan accounts has increased and the return on equity (ROE) has jumped to 19 per cent.
Speaking to Bloomberg TV India , Muthoot Finance MD George Alexander Muthoot says the company, which has guided for 10-15 per cent loan growth in FY17, hopes to outpace the target easily as the sentiment towards gold loan has improved in the last couple of quarters.
Moreover, tweaks in processes have helped in better and faster interest collection, he said. Excerpts:
In the last 3-4 quarters, we have been tweaking our processes at branches for customer acquisition, gold loan growth and other things. And that is yielding results — this year, the growth in the gold loan segment has been ₹1,480 crore.
We had actually targeted or given guidance for 10-15 per cent growth over the full year. But at the pace we are growing, we may be able to better that because the sentiment towards gold loan has improved in the last couple of quarters.
The other side is about interest collection. We have changed the psyche of the customers who were earlier paying interest only as bullet payments.
Now we are increasingly asking branches to tell the customers to pay interest monthly or quarterly, so that the interest burden is not high after a longer period of time. That has resulted in better interest collection. Earlier, they had the option of paying interest in three, six, 9 or 12 months.
We have also been able to reduce the tenure of the interest in existing loans — that are being reflected on the better interest collection and yield, too. These two things are helping us with faster growth.
And with the gold loan sentiment and general demand picking up for loans and gold loans, we will see the uptick now.
The movement of gold prices has been favourable to your business . The AUM (assets under management ) has increased by 6 per cent year-on-year, which is less than your own expectation of 8-12 per cent.
The returns on retail loans have gone up to 4.3 per cent from 3-3.3 per cent last year, and returns have improved. How will you sustain the high returns going forward?
The growth of 6 per cent is for Q1 while the 15 per cent is for the full of FY17. So this quarter, we were growing by ₹1,480 crore, which is almost 6 per cent compared with the Q1 of FY16.
So if you multiply by four, it should be more than 24 per cent annually. So we are hoping to see more than 15 per cent growth in AUM this year. The yield is better because our interest collections are now better. We are collecting more and more interest monthly and so our yield is definitely better.