Company Overview
Muthoot Finance is the country’s largest gold finance company with a pan-India presence. The company is registered as a ‘Systemically Important Non-Deposit-Taking Non-Banking Financial Company (NBFC-ND-SI)’ with the Reserve Bank of India (RBI).
Muthoot Finance provides personal and business loans secured by gold jewellery within a reasonable time. It does not finance bullions or gold biscuits. In addition to gold financing, the company offers an extensive range of products & services such as housing finance, foreign exchange services, business loans, wealth management services, microfinance, insurance services
Today, Muthoot Finance has over 5,330 branches across India, with a global footprint across the US, the UK, UAE, Central America, Sri Lanka, and Nepal. In the financial year 2012, the company listed itself on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Over the past 133 years, the organization has evolved its product portfolio and delivers a seamless digital customer experience.
Gold Loan Market
In India, the gold loan lenders classified into formal (organized) and informal (unorganized). According to the KPMG report, the gold loan industry is dominated by the unorganized market with 65%. The organized market accounts for 35% of the market share.
The unorganized gold loan market players typically comprise money lenders who are well aware of the local market and provide easy loans at a high-interest rate of 25-50 per cent.
The organized gold loan market encompasses banks (public, private, small finance and co-operative), NBFCs and Nidhi companies. The Reserve Bank of India regulates banks and NBFC, and the Ministry of Corporate Affairs regulates Nidhi Companies.
NBFC’s are expanding market presence and focusing on faster loan processing, accurate gold valuation, safekeeping, and auctioning. Banks who primarily consider gold loans to meet Priority Sector Lending are less flexible and lack quick turnaround time. The data on gold loan books shows that NBFC’s credit outstanding in the last five years grew faster than banks. The Small Finance Banks and Nidhi companies aim to increase the customer base shifting to an organized market and hence pose a challenge to NBFC’s.
The gold loan companies are moving towards expanding their digital presence and providing loans at the comfort of customer’s homes. They are also looking to unlock the potential of less-penetrated markets such as Jammu & Kashmir, Ladakh and northeastern states.
The Indian gold loan market expected to grow at CAGR 13.4 per cent between the financial year 2018 to 2022 and reach $46 billion in the financial year 2022.
Growth Story
Muthoot Finance in the financial year 2020 reported robust growth in profitability and assets under management.
Muthoot Finance has experienced an increase in the loan asset portfolio of an average of 15 per cent in the last three years. In the financial year 2020, the loan asset portfolio amounted to ₹416 billion.
Financial Scorecard
Analysis of FY21 quarterly results
During the pandemic, Muthoot Finance provided access to loans to shopkeepers, small businesses, and traders as they required funds for liquidity to run their businesses. Therefore, as a gold finance firm, the company tends to do well during crises as it makes borrowing easier.
In 2020, the Reserve Bank of India relaxed the gold lending norms, allowing lenders to disburse up to 90 per cent compared to earlier 75 per cent of the value of the gold pledged as loans. This enables customers to avail a higher loan against their gold jewellery.
Muthoot Finance is on a growth trajectory with an increase in assets under management and asset quality improvement. It’s market penetration in the rural and urban areas, and a focus on digital (initiatives like ‘Loan at Home’) make it a game-changer in the gold loan market.
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