George Alexander Muthoot Curated

Managing Director of Muthoot Group

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This profile has been added by users(CURATED) : Users who follow George Alexander Muthoot have come together to curate all possible video, text and audio interview to showcase George Alexander Muthoot's journey, experiences, achievements, advice, opinion in one place to inspire upcoming entrepreneurs. All content is sourced via different platforms and have been given due credit.

  • How has the rules of engagement changed between siblings from generation to generation in your family?

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  • How did the business expanded after 1979?

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  • What was Muthoot before the split and what was it after?

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  • How did the journey of the "Muthoot Finance" started?

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  • Are you investing a lot on digital channels rather than on branches due to the current situation?

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  • What is going to be the growth strategy post Covid?

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  • What keeps you so optimistic about the demand for gold loan at this Covid 19 situation, when gold prices have already escalated?

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  • What are the chances that you may end up diversifying your core?

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  • Banks are also giving up gold loans at competitive rates, so how are you keeping up with that?

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  • If the gold prices remains flat,do you think the size of opportunity to lend loan will get reduced?

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  • If the gold prices remains flat,do you think the size of opportunity to lend loan will get reduced?

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  • What happens if the gold prices do not do any movement for the next 3-4 years?

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  • The last decades,since listing,you have been one of the top 5 best performing stocks. What according to you were some of the major contributors to this outperformance?

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  • What are the focus areas of growth for you?

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  • If the price of gold goes to 50000, what will happen to your gold business?

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  • How has demand been in the core gold loan business?

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  • Will the expansion of your branches, slow down in rural areas?

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  • What was the purpose behind setting up the "Muthoot Group"?

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  • A decade ago, you were only a gold loan company. You have diversified. In the next five years, how much of your business and profit will come from non gold businesses?

    Gold loan business is one of the best lending businesses because there are no NPAs there. AUM is always growing and always there is liquidity in the market. Our focus will continue to be on the core gold loan business. As of today, 90% of our business is gold loans and 10% is non-gold loan which are home finance, microfinance, vehicle finance etc. In the next three to five years, our non gold loan business share may go up to 15% or a maximum of 20%. But our focus will always be gold and we will not shy away from giving maximum thrust to the gold loan business. The yield is always the best in the gold loan business. As I said earlier, this business has very little NPAs or no loan loss because of NPAs. It is also very short term and that is why we feel that the gold loan business should be there. But the difficulty with gold loan business is that the average tenure is just four to five months. We have to keep on building new customers or see that the old customers come back to us again and for taking these short term loans. Since we are in the market, since customers know about Muthoot and gold loans they prefer to come to us.

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  • Let me reverse the scenario. I talked about Rs 40,000 going to Rs 50,000. What happens when Rs 44,000 falls to Rs 40,000? Will there be a drop in business?

    I do not think so. The drop in business can happen only if people do not require money. If they require money, what we have seen is probably a very, very small percentage of loan business customers who want the maximum but will not get that amount; they will get a 10% lesser than that. But if a customer really needs money and has gold with him, he can bring more gold with him and so instead of giving 10 grams, he can bring 12 grams; instead of giving two rings he may give three rings to get the money he wants. We have always seen that whenever there is a small dip in price, people come with more gold. We have not seen much decrease in AUM when the gold prices come down.

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  • Your subsidiaries contribute about 13% to your overall business. Do you see this share rising and if so what would be the focus areas for growth for you?

    Our focus areas for growth would be all India and probably we are opening branches all over the country and we are everywhere. Our focus would be to go to places where we are not there because reach is also important in a gold loan business. We have to be where the customer needs the money and customers may not be willing to travel miles and miles to go to a place to pledge his gold. So, we should be near a place where the customer will find it convenient to come to the branch and pledge the gold.

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  • If gold price goes to Rs 50,000, what happens to your gold business? Would there be an incremental kick because the collateral value will go higher and that will aid your business? Can you construct a scenario for us?

    You can construct two scenarios. One, as far as the company is concerned, whatever loans we have given to the customers -- the collateral value goes up and certainly the strength of the collateral will go up if the price goes up. Second, there are a certain number of customers who would want maximum value for their gold as loan. So, instead of borrowing Rs 20,000 they may be able to borrow Rs 22,000-23,000. That also will help customers.

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  • How has the demand been in the core gold loan business? Has there been an increment on both value and volume terms? Going forward, what is the outlook on gold loan demand?

    Gold finance has been doing well. In the last quarter, the growth has been extremely good. AUMs have been showing good growth and I am sure that we will be able to achieve the 15% growth guidance that we had given this year.

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  • Banks are also giving out these loans and their cost of borrowing is very competitive. How are you offering something that is more attractive?

    I told you people take a loan and they return it in seven days, five days, one month, two months, etc., and we charge interest only on the actual number of days. There is no service charge. There are no pre-payment charges. It is very convenient and we are able to give a loan. For the first time maybe it takes 15 minutes; for the second time, the customer can walk out with the money in 10 minutes. It is a convenience and the average ticket size for us is only Rs 40,000.

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  • Fintechs are saying that they can also give bridge finance at different rates. They are following a model where platforms are now able to make borrowers and lenders meet. The collateral here in this case is very different. Is that a threat to gold financing?

    Gold financing has always been there. There have always been people who lent money with security, without security. Today without security, people are looking at fintech finance and micro finance. They have been there for the last 15-20 years, but it has not affected the gold loan market or gold financing market at all. People have many options. They can go to micro finance, fintech. They can take a personal loan. They can take an SME loan. They can go to banks. Gold finance is anothe ..

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  • Just to understand your business model, gold is in abundance. India is a country where the demand for credit will always be abundant. So can I say that 15% to 20% growth is there as long as you want to grow at that rate?

    Yes. I think we have guided for 15% growth, we should probably do more than 15% -- around 15-20% this year also. Going forward, we see this because more and more people are seeing this as a convenient way of raising money in the short term. It is bridge finance for people who are not getting finance for small businesses, from the banks. Once they get the finance from the banks, they replace it with bank loan. Till then, this is a bridge finance and this has helped us.

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  • You have recently purchased IDBI’s AMC business for over Rs 200 crore. What is the rationale of the buy and your outlook on this segment?

    Muthoot has been in financing business since 1939. We had been getting money from the public as gold bonds or NCDs, private NCDs, public listed NCDs. Today, one of our NCDs schemes are running. Just as we have gold loan business, we also have good franchise or good customers who invest in our company because they can relate to the company and are very confident about depositing their money with Muthoot.

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  • If gold prices go higher, obviously the ability to lend increases. My whole view is if gold prices remain flat, then does the size of opportunity get reduced?

    You should also understand that not the same number of people are coming again and again. The market is huge. There is 30,000 tonnes of gold lying as ornaments with the public and today the organised gold lending market is just 100 or 200 tonnes, that is all. The rest is still out there. More and more people are thinking of gold loan as a very quick and easy way of getting money. As we progress, more and more people are using this opportunity to monetise the idle asset and that is why ..

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  • Some would argue that gold prices are not moving the way they moved in the last decade and gold has not given great returns for this decade. Silver also has given negative returns. Your business is highly dependent on the movement in gold prices. What happens if gold prices do not go anywhere for next three-four years?

    I should correct you there that our business is not dependent on gold price because the average tenure of our loans is four months only. So, what we give is today’s price.In four months, there has never been any sharp fall or fluctuations in the price of gold. So, only if a 50% price fall happens in two -three months, then that would be a problem. Otherwise, a slow movement up or down would not affect us at all.

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  • Since listing, you have been one of the top five best performing stocks. What according to you were some of the major contributors to this outperformance?

    Muthoot Finance has focussed mainly on its core strength which is gold financing. Right from there, we have always been focussing on gold loan business. Even today, 90% of our portfolio is only gold loans. That is our core competence and that is giving us good business today.

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  • A decade ago, you were only a gold loan company. You have diversified. In the next five years, how much of your business and profit will come from non gold businesses?

    Gold loan business is one of the best lending businesses because there are no NPAs there. AUM is always growing and always there is liquidity in the market. Our focus will continue to be on the core gold loan business. As of today, 90% of our business is gold loans and 10% is non-gold loan which are home finance, microfinance, vehicle finance etc.

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  • Let me reverse the scenario. I talked about Rs 40,000 going to Rs 50,000. What happens when Rs 44,000 falls to Rs 40,000? Will there be a drop in business?

    I do not think so. The drop in business can happen only if people do not require money. If they require money, what we have seen is probably a very, very small percentage of loan business customers who want the maximum but will not get that amount; they will get a 10% lesser than that.But if a customer really needs more money and has gold with him, he can bring more gold with him and so instead of giving 10 grams, he can bring 12 grams; instead of giving two rings he may give three rings to get the money he wants. We have always seen that whenever there is a small dip in price, people come with more gold. We have not seen much decrease in AUM when the gold prices come down.

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  • Your subsidiaries contribute about 13% to your overall business. Do you see this share rising and if so what would be the focus areas for growth for you?

    Our focus areas for growth would be all India and probably we are opening branches all over the country and we are everywhere. Our focus would be to go to places where we are not there because reach is also important in a gold loan business. We have to be where the customer needs the money and customers may not be willing to travel miles and miles to go to a place to pledge his gold. So, we should be near a place where the customer will find it convenient to come to the branch and pledge the gold because physically the gold has to come to us and that is the key factor for this gold loan business.

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  • If gold price goes to Rs 50,000, what happens to your gold business? Would there be an incremental kick because the collateral value will go higher and that will aid your business? Can you construct a scenario for us?

    You can construct two scenarios. One, as far as the company is concerned, whatever loans we have given to the customers -- the collateral value goes up and certainly the strength of the collateral will go up if the price goes up. Second, there are a certain number of customers who would want maximum value for their gold as loan. So, instead of borrowing Rs 20,000 they may be able to borrow Rs 22,000-23,000. That also will help customers. Thirdly, when gold is seen as a commodity whose price is going up, people will start thinking about gold and more and more people would think of taking gold loan because today although we have about 20,000 tons of gold in the country, not more than two or three tons of gold is there in the organised lending market. There are still people with gold holdings who have not used the facility for gold loan financing. If gold value goes up and gold is talked about more often in the market, then people will think that gold is very easy for them to collateralise and take a very easy bridge loan or any loan for that purpose.

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  • How has the demand been in the core gold loan business? Has there been an increment on both value and volume terms? Going forward, what is the outlook on gold loan demand?

    Gold finance has been doing well. In the last quarter, the growth has been extremely good. AUMs have been showing good growth and I am sure that we will be able to achieve the 15% growth guidance that we had given this year.

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