Muthoot Finance posted a 21% fall in Q1 profit due to lower loan growth. George Alexander Muthoot, MD of Muthoot Group, told FE the company does not expect business to pick up substantially in FY14 and expects margins to stabilise around Q1 levels. He also said if the company’s cost of borrowing goes up due to RBI’s measures, it will pass this cost to its customers. Excerpts:
The company?s Q1 net slipped 21%, can you explain this. Also what is your outlook for this year?
Actually the growth in gold loan business has been flat and the asset under management has come down by 2%. We were also hit as we lowered our interest rate to 19.5% from 21% in the last eight months and fall in gold prices. Yet we have increased our branches by 81 and customers have increased to 65 lakh from 63 lakh in the previous quarter. Our gold tonnage has increased to 137 tonnes from 134 tonnes. We expect asset under management in FY14 to be flat or grow by 10% if the economy improves in the second half of the year.
What were your net interest margins (NIMs) in Q1? And what is your outlook for NIMs going forward.
Our NIMs was 9% in Q1 down from 10% in the previous quarter. I expect NIMs to stabilise around 9%. This was due to the lowering of interest rates and we did it to benefit our customers. We have the lowest interest rates in the NBFC gold loan space.
What would be the impact on your cost of funds due to the measures taken by the Reserve Bank of India to snap fall in the rupee?
We don?t have liquidity issues right now as our assets under management shrank 2%. But if the banks were to hike there interest, we will have to pass it on to our customers the way banks are passing their extra cost due to measures by RBI on to us.
Your Q1 provisions dipped from last year. Please explain.
In the last quarter we had made provisions for standard assets so we did not have to provide in this quarter. Plus the business also did not pick significantly enough.
How has the asset quality behaved in this quarter?
Gross NPA was at 2%, which is same compared with the last quarter.
Will the changes in gold import policy impact you in any way?
This is a misconception and we are not in the business of importing gold and it will not impact our lending business in any ways.
