Wednesday, March 6, 2013

Muthoot Finance Ltd in conversation

Managing Director, Muthoot Finance Ltd in conversation with B&E’s mona mehta

B&E: You are planning to go public shortly? Does it aim at capacity expansion alone?
GAM: Not exactly. Going for the public issue is necessary for both, scaling up the business as well as to diversify our existing investor base.

B&E: Considering the fact that the competition in this segment is heating up faster than ever, how are you planning to save your number one position?
GAM: With a gold loan book of over `100 billion and a network of close to 2000 branches, we are the market leader today and one of the most respected brands in financial services domain. As the pioneer and leader of gold loan business, our efforts will be to maintain this leadership position. Thus, we are constantly upgrading our customer service quality. Efforts are also on to vastly expand the distribution reach by improving the branch network. The company aims to add 1,075 new branches this fiscal – 575 in southern states and 500 in northern states. Among them, 600 branches have already opened.

Moreover, the group is now looking forward to set global footprints. Keeping that in mind, we have opened an office in New Jersey, US for remittance business after acquiring a company, in the UK, where gold lending has been a big business, awaiting for the regulatory approval to launch our operations. Also, we have a money exchange company in Dubai, which is in operation since last year.

B&E: Gold loan providers in general deal with short-term funding. You also do the same. What’s the reason behind it?
GAM: Gold loan is taken for personal purposes. It is now widely accepted as a short term business loan. So, the normal duration of such loans range between 3 to 6 months. However, there are schemes where the term can go up to 1 year.

B&E: Are you considering the option of acquiring small to medium gold loan financiers for capacity expansion this year?
GAM: Yes, normally we do consider all such options. But at present, we don’t have any such plan in the pipeline.

B&E: What is your our outlook for the sector? Do you think the competition will further intensify?
GAM: Yes. Competition is bound to increase as a number of large players are entering in to this business. Even banks are interested. But then, the growth potential is tremendous. As of 2009, gold stock in India is estimated to be around 15,000 tonnes and organised gold loan portfolio is still a miniscule portion of the same.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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