Muthoottu Mini eyes 45% loan growth this fiscal year

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Kochi-based mid-size gold loan player Muthoottu Mini Financiers is looking to increase its loan sales by more than 45% this financial year as it embarks on faster expansion and also increases the productivity per branch as the economy returns to near normality since the Covid -19 pandemic. Job losses from the first three waves of the pandemic and the subsequent upturn in economic activity spurred demand for gold loans from individuals for personal needs and small businesses for working capital, coupled with a massive surge in bullion prices since the pandemic hit the world in March 2020.

Muthoottu Mini, a native of Muthoot Group, closed FY22 with growth of over 25% and an AUM of Rs 2,500 crore, which rose from Rs 1,994 crore in the previous fiscal year.

The largest entity of the Muthoot Finance group is a listed company with over Rs 65,000 crore in AUM, up 11% from FY21, while the other Muthoot Fincorp is the third largest player with around Rs 10,000 crore in live loans and No 2 Manappuram Finances increased by 11% in FY22 to Rs 30,300 crore. Muthoottu Mini recorded an average loan growth rate of 22% in the three years to FY21 and 25% in FY22 and hopes to add 45% more new customers this FY. This industry normally only counts new loans as loan sales and not as renewals of promises.

Muthoottu Mini’s chief executive, Mathew Muthoottu, told PTI that he expects new loan sales to hit 45% this fiscal year. “From the AUM perspective, we are looking at Rs 4,000 crore by next March, 60% higher than its FY22 AUM of Rs 2,500 crore, helped by the massive expansion underway under which it will open 170 branches this year, taking the branch footprint to almost 1,000 by the end of next March.” He said most of the new branches will come in Gujarat, Maharashtra, India. Haryana, Delhi-NCR and Andhra-Telangana.

According to Krishnan Sitaraman, Senior Director at Crisil, gold lending will continue to be a sought-after asset class given its ability to offer immediate liquidity and also due to lenders being cautious about the growth of many other retail asset classes. Last year, the organized gold lending industry grew by around 22%, but India Rating expects it to halve this year to 11-13% due to falling prices of gold, which directly affects the loan to value ratio for a customer.

According to Jinay Gala, Associate Director at India Ratings, the growth of gold lending NBFCs depends on the development of the price of gold and given the more or less stable price development. “We think the industry will see growth in the range of 11-13% for the big players, but the smaller ones could still see volume-based growth,” he told PTI. The agency has a stable outlook for the sector for FY23.” Muthoottu Mini Managing Director PE Mathai said that with the recent rating upgrade to A-, they hope to further exploit the banks’ growth capital.

Explaining the rationale for the bullish growth outlook, he said, with branch expansion and rating upgrades, they expect to sell more. Also, they want to massively increase the productivity per branch, which is only Rs 3.2 crore now, while their rivals have more than double that. Previously, with low ratings, it was difficult for us to obtain capital from banks which was cheaper than borrowing from the market. But now, with a better rating, we can raise more money from the banks. So far, we have raised funds in the market mainly through MNTs and the retrocessions were only worth the funds raised, Mathai said.

Their market borrowings via MNTs stood at Rs 1,600 crore in FY22 and bank lending at Rs 1,005 crore. We want to make the source of funding equal from this year and hopefully the rating upgrade should help, Mathai said, adding funding from just seven banks until a few years ago. currently they have relationships with over 20 banks now.

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

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

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

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