Cash crunch affected gold loan biz, should be normal in a month: Muthoot Finance
George Alexander Muthoot, Managing Director, Muthoot Finance, said that though cash crunch business has affected the gold loan business post demonetisation, but the business will be back to normal within a month.
Muthoot spoke to Zeebiz on the impact of demonetisation on their business and more.
Zeebiz: How demonetisation has impacted gold loan business and overall the whole company?
George Alexander Muthoot: Cash crunch has affected Gold loan business also. But we have offered online payment options to the customers and business is picking up. Should be back to normal within a month.
Zeebiz: Post demonetisation, what is your outlook for gold loan business in the country?
George Alexander Muthoot: We feel that, once the cash shortage problems are over, business will bounce back. There will be a revival in small businesses and this will definitely increase the need for Gold Loans. Also, the demonetisation will immensely benefit the organised companies in the sector. The unorganised players will be impacted as they don’t have the online transaction facilities.
Zeebiz: Coming to your recent Q2 results, on y-o-y basis, the net profit increased by 70%. What has helped you to report robust results?
George Alexander Muthoot: Operating profit grew by 72% yoy to Rs462 crore in Q2FY17 from Rs. 268 crore in Q2FY16 due to operating leverage benefits. As business per branch improved to Rs.633.2 crore from Rs601.4 crore in Q2, fixed nature of costs helped to reduce cost/ income to 38.1% in Q2 from 39.1% in Q1.
Zeebiz: How was the festive season this year consider the gold prices were in favour of people?
George Alexander Muthoot: Business was good.
Zeebiz: What will be your outlook for this fiscal? Post demonetisation, will the cash flows impacted?
George Alexander Muthoot: We feel that the cash crunch problem will be over soon. Economy/business will improve. There will be more demand for Gold Loan.
Zeebiz: How well you are placed to tackle demonetisation?
George Alexander Muthoot: We are well placed with our various on line payment initiatives. For disbursement of loans, the company is encouraging online gold loans, direct credit to customer’s Bank account, loading to prepaid cards and by cheque or by loading the loan amount on a pre-paid VISA card.
For repayment of loanss, we are accepting payments through our Online web-platform (Webpay), iMuthoot mobile Mobile Application (iMuthoot) or through, TGS/NEFT/IMPS facility. We are also accepting cheques and demand drafts.
Zeebiz: How much time will it take for your business to recover from demonetisation? Will it impact your Q3 number? If, then by how much?
George Alexander Muthoot: In terms of profitability, we don’t think Q3 numbers will be impacted. In terms of growth, we may not see big growth in the Q3, but we are sure in the fourth quarter we should be able to regain what business we lost in the Q3. In terms of AUM, we will be able to achieve18 to 20% full year growth.
Zeebiz: What has been the impact of gold loan repayments in November? Also, if you can tell the ratio of loan repayments in cash and bank transfer?
George Alexander Muthoot: Post-demonetization, we have reinforced our digital platforms in order to handle larger number of transactions. We have seen a 550% increase in the disbursements through digital channels and 270% increase in the interest payments through digital channels.