Managing Director, Muthoot Finance Ltd in conversation with B&E’s mona mehta
Muthoot Finance Ltd (MFL) has of late gained considerable media presence and brand recall, much because of their unique positioning as a ‘gold loan’ company – an area that previously used to be in the realm of typical gold and jewellery houses. It’s now India’s largest in the niche gold loan area, and has managed to notch up a humongous asset base of `100 billion with over 1,800 branches. Collaborating with mammoth global PE firms like Baring Private Equity Partners and Matrix Partners, MFL has the aim of doubling its asset base to `200 billion in this fiscal...
B&E: Despite being a huge gold loan company and despite having a considerable asset base, you recently decided to partner with private equity players. What’s the rationale behind this move?
George Alexander Muthoot (GAM): Our company is known as a fully family owned entity. The inclusion of global investors is a significant milestone and marks a new chapter in our journey. This capital infusion will further strengthen the capital base of the company. These investments are made after elaborate due diligence by the investors. The support that we have received from reputed investors like Baring Private Equity Partners and Matrix Partners India is an endorsement of the robust business enterprise that we have nurtured and built over our lifetime. This will position the company to further embark on an aggressive asset build up and will be a fillip to our growth plans. This is also a prelude to our plans to float our IPO in the near future. All these are part of our plans to double the company’s business to `200 billion by the end of the current financial year.
B&E: With respect to your gold loan segment strategy – what was it that worked so well for you?
GAM: The Muthoot Group has been in business for the last 123 years and has an unblemished record of trust and goodwill among customers and stake holders alike. We have constantly innovated to deliver customer-oriented products and personalised service deliveries to set new bench marks in the gold loan industry. During 2009-10 fiscal, the company recorded a growth of 119% over the previous year in terms of distribution of gold loans. During the year we mopped up a turnover of `74 billion from gold lending and `31 billion from gold bonds. Even this year, the company, which used to be dependent on gold loans for 90% of its revenue, is aiming at a business of $51 billion from gold bonds, almost 25% of the target of `200 billion.
B&E: The gold market has gone through a dynamic change over the last 4 to 5 years as gold prices have shot up from a level of `8,000 per 10 gms to almost `19,000 per 10 gms. How has it impacted your business practice?
GAM: That’s true, the price of gold has gone up very high, and so is the competition in the gold loan market. Nevertheless, our consistent customer friendly services still attract customers to our branches. But then, customers are now increasingly looking for easy accessibility and to meet those needs, we are trying to set up new branches so that we can be present wherever the customers need us.
B&E: Apart from providing fast processing of loan applications, what are the other offerings that separate you from your competitors?
GAM: Earlier, a gold loan was looked upon as a distress product. But now customers have realised that gold loan is an easy alternative to personal loans and loan against credit cards. Talking about Muthoot Finance, we process loan applications really fast with minimum documentation. The interest rate is also attractive. In fact, we have products to suit all segments. There are products that give maximum amount for their gold; there are products that are suitable for people who are interest sensitive. Our repayment system is also quite different. Apart from allowing our customers to repay in installments, we also allow them to repay in one go with out paying any penalty.
Muthoot Finance Ltd (MFL) has of late gained considerable media presence and brand recall, much because of their unique positioning as a ‘gold loan’ company – an area that previously used to be in the realm of typical gold and jewellery houses. It’s now India’s largest in the niche gold loan area, and has managed to notch up a humongous asset base of `100 billion with over 1,800 branches. Collaborating with mammoth global PE firms like Baring Private Equity Partners and Matrix Partners, MFL has the aim of doubling its asset base to `200 billion in this fiscal...
B&E: Despite being a huge gold loan company and despite having a considerable asset base, you recently decided to partner with private equity players. What’s the rationale behind this move?
George Alexander Muthoot (GAM): Our company is known as a fully family owned entity. The inclusion of global investors is a significant milestone and marks a new chapter in our journey. This capital infusion will further strengthen the capital base of the company. These investments are made after elaborate due diligence by the investors. The support that we have received from reputed investors like Baring Private Equity Partners and Matrix Partners India is an endorsement of the robust business enterprise that we have nurtured and built over our lifetime. This will position the company to further embark on an aggressive asset build up and will be a fillip to our growth plans. This is also a prelude to our plans to float our IPO in the near future. All these are part of our plans to double the company’s business to `200 billion by the end of the current financial year.
B&E: With respect to your gold loan segment strategy – what was it that worked so well for you?
GAM: The Muthoot Group has been in business for the last 123 years and has an unblemished record of trust and goodwill among customers and stake holders alike. We have constantly innovated to deliver customer-oriented products and personalised service deliveries to set new bench marks in the gold loan industry. During 2009-10 fiscal, the company recorded a growth of 119% over the previous year in terms of distribution of gold loans. During the year we mopped up a turnover of `74 billion from gold lending and `31 billion from gold bonds. Even this year, the company, which used to be dependent on gold loans for 90% of its revenue, is aiming at a business of $51 billion from gold bonds, almost 25% of the target of `200 billion.
B&E: The gold market has gone through a dynamic change over the last 4 to 5 years as gold prices have shot up from a level of `8,000 per 10 gms to almost `19,000 per 10 gms. How has it impacted your business practice?
GAM: That’s true, the price of gold has gone up very high, and so is the competition in the gold loan market. Nevertheless, our consistent customer friendly services still attract customers to our branches. But then, customers are now increasingly looking for easy accessibility and to meet those needs, we are trying to set up new branches so that we can be present wherever the customers need us.
B&E: Apart from providing fast processing of loan applications, what are the other offerings that separate you from your competitors?
GAM: Earlier, a gold loan was looked upon as a distress product. But now customers have realised that gold loan is an easy alternative to personal loans and loan against credit cards. Talking about Muthoot Finance, we process loan applications really fast with minimum documentation. The interest rate is also attractive. In fact, we have products to suit all segments. There are products that give maximum amount for their gold; there are products that are suitable for people who are interest sensitive. Our repayment system is also quite different. Apart from allowing our customers to repay in installments, we also allow them to repay in one go with out paying any penalty.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
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Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
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IIPM Links
IIPM : The B-School with a Human Face
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