Muthoot FinCorp to diversify beyond gold loans

14 May 2024 , 11:20 AM

As part of a three-year diversification strategy, Muthoot FinCorp plans to reduce its reliance on gold loans by reducing the share of its core business to 80% from 98%, according to managing director Shaji Varghese.

According to Varghese, the company wants to offer lower- to middle-class consumers full-stack financial services. In order to support its new business ventures, which include MSME finance and providing loans against property (LAP), the institution is growing its branch network and intends to hire 4,000 additional employees this fiscal year.

“Now, we are in a period of transformation. We have been a gold loan company historically. In the past, loans for gold accounted for about 98% of total earnings. However, things are now shifting. We see a greater opportunity in the lower to middle-income segment, therefore we have adopted a business strategy that aims to make us the go-to source for services,” Varghese stated in an interview.

Though the details are still being finalized, Muthoot FinCorp also intends to go public in two to three years. “We have plenty of time to catch up on things, but we haven’t started working on a project plan yet. We still lack a final plan,” Varghese stated.

On an independent basis, Muthoot FinCorp had loan assets of ₹20,487 Crore, of which ₹18,000 Crore was in gold loans and the remaining amount was in SME and property-backed loans.

According to Varghese, the company wants to increase the percentage of earnings from non-gold verticals from 2% to 80% in three to four years. “The goal is to do other businesses and service more consumers, not to decrease gold loans. Approximately 120 to 150 million families continue to exist that are not a member of a formal credit system. Furthermore, our business exists to assist them. With that in mind, we have now launched the mortgage offer, the SME offering from Muthoot FinCorp, and the loan against property,” he stated.

For its new business lines, Muthoot FinCorp intends to hire 4,000 personnel this fiscal year. 3,500 employees were hired by company in the previous year, 1,500 of them were assigned to new ventures. There are presently roughly 22,500 employees working for the organization.

The company was given regulatory authority to open 200 branches last year. According to Varghese, around 100 branches have already opened, and in the first and second quarters of current fiscal year, another 100 will open.

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