Kerala based NBFC reports a 61% loan to value ratio against the regulatory requirement of 75% and long-term average 69%-70%. Last quarter Muthoot Finance booked a 2.5% rise in its profit to Rs. 931 crore.
George Alexander, Managing Director of the company, said that though the company is ready to lend 75% of the asset value of gold customers are taking loans according to their needs, due to higher gold prices LTV of new loans issued are in the range of 50%. He also added that gold in custody for the current quarter had reduced. The total weight for gold pledged for Q2 was 163 tonnes compared to 171 tonnes for the same period last year.
There is visible demand for gold loans in the market, the company is positive about outpacing the projected 15% growth rate for the current fiscal year. The company has home loans, microfinance, and insurance broking subsidiaries, but gold loan alone constitutes 91% of the business. The gold loan portfolio of the company rose 14% in Q2 and stood at Rs. 46,678 crore, while the non-gold portfolio remained flat. Asset growth in the second quarter aided the company to cover losses in the first quarter. During its Q2 result announcement, the company reported its highest-ever quarter-on-quarter growth in the loan portfolio.
He said that on a month-on-month basis collections had improved significantly. Collections in home finance were 84%, in-vehicle finance was 82%, and 86% in microfinance. He added that the company had made provision for COVID-19 in all these divisions. Muthoot made fresh loan disbursement to 4.40 lakh customers amounting to Rs.3,653 crore and Rs. 3,460 crore disbursement was made to 4.67 lakh inactive customers. He said that cost of incremental borrowings had come down to 2%, with the reduced cost of funding the company expects its average yield to reduce from the current range of 19%. Muthoot is determined to maintain its NIM at 9-10%.
Recently Muthoot Finance was announced to be added to the MSCI India domestic index. Regarding NPAs, he said that there is no NPA in gold loans, loan loss in the segment is zero. As of now, Muthoot can’t open a branch without a gold loan, he added.
