Muthoot Finance eyes 10-12% loan growth by end of FY23

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By Shashank Didmishe

Kochi-based Non-Banking Finance Company (NBFC) Muthoot Finance plans to improve its business through its core gold lending operations to achieve its guided growth of 10-12% by the end of the fiscal year underway,” said George Alexander Muthoot, chief executive. in an interaction. In the first quarter of FY23, the company recorded a 2% sequential decline in its assets under management (AUM) and moderate growth of 8% on an annual basis (year-over-year) compared to an earlier forecast of growth of 10 to 15%.

Earlier, the company saw a lower AUM as it had to auction a higher volume of gold than usual as a portion of the customers were unable to repay the loans taken against the gold in why the company had to auction off the gold. The company auctioned Rs 5,000 crore gold in Q4FY22 and around Rs 1,500 crore gold in Q1FY23, Muthoot said, adding that auction volumes are expected to return to normal due to improving the economic situation.

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The company expects loan growth to stabilize in Q2FY23, and in Q3 and Q4 it expects a 10-12% improvement in loans. The company is witnessing business growth at the branch level and is also opening branches which will boost business. The company recently received approval from the Reserve Bank of India (RBI) to open 150 new branches on a pan-India basis. Some branches have started operations and management expects all branches to start operating by October 31.

“We are bullish on the gold lending market. Our priority is gold lending and we will continue to do so and we are confident about the outlook for the gold lending business. This will be our primary focus going forward. the future,” Muthoot said.

The company’s optimism on gold lending comes despite tough competition from banks. Banks are focusing more on gold lending, but they are not taking business away from the company, Muthoot said, adding there is plenty of room to grow. However, analysts expect gold NBFCs to give up some margin to support loan growth due to competitive pressures.

The company moved its lower-rate teaser loans it disbursed between October and February to higher rates. Although the company stopped these loans from March, it was able to retain 80-85% of its customers, which will also contribute to its net interest margin (NIM) in the future, Muthoot said.

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Going forward, discontinuing teaser loans, migrating to higher rates and higher rates for new loans should improve loan performance, ICICI Securities said in a report. While Muthoot Finance’s yield fell 144 basis points (bps) sequentially, its counterpart Manappuram Finance’s yield on loans rose 63 bps as the latter disbursed new loans at a higher rate, the Bank said. brokerage house.

On the new fundraising, Muthoot said the company plans to raise about Rs 500-600 crore through the issuance of listed non-convertible debentures (NCDs) during each quarter of the financial year. The company recently raised Rs 643 crore from the publicly traded NCD issue, which is used for onward lending for gold lending, he added.

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