The Kochi-headquartered Muthoot Finance, which is the market leader in the `19 trillion market with over Rs2 trillion in asset under management (AUM), has elevated KR Bijimon as its first-ever non-family member to lead the 87-years-old organisation as the CEO from next month. The company controls half of the market pie among pure-play gold loan companies and a little over 10% of the overall market. He spoke to Benn Kochuveedan of TNIE in an interaction delineating his vision for the company as the first-ever outsider to lead the group. Edited Excerpts:
You are the first person from outside the Muthoot family to lead the group in its nearly nine decades of history. What’s your vision for the company that you have been part of for the past 35 years? What changes you want to bring in?
Yes, I will be the first CEO from outside the family. I joined Muthoot Finance as a finance manager way back in 1995, shortly after the family got divided and when we had just about 30 branches but today we are all across the country with over 7,500 branches.
Speaking from an industry point of view that we created and continue to lead, we should look at gold loans as a key growth engine of the entire economy. Traditionally we were following the Western system of credit scores or bureau scores to extend credit. But we have the luxury of gold being such a retail asset. In fact, we should have been substituting credit scores with a customer’s gold holding that runs at the national level in excess of 35,000 tonne and only 3,000 tonne of them come to the mortgage market.
Look at Tamil Nadu which is the largest gold loan market where the maximum gold loan is drawn down by small businesses. The people of the state lead in monetising their gold holding for the maximum productive purposes and that is visible in their business growth as well.
In fact, the entire economy should thank NBFCs for creating any new credit category be it gold loans, home loans or auto loans. The point which I am making is this, personal finance products were never been developed by banks or housing finance, which is the largest with over `40 trillion in outstanding loans was developed by HDFC and not by any commercial banks. They were the prime movers and they developed it. And then maybe later banks jumped into it. In the same way, transport finance and the car finance business was never been developed by banks.
We started the gold loan industry the credit for pioneering the home loan market should go to HDFC and that of auto loans must be with Shriram Finance. And we if look at short-term retail credit it should go to Bajaj finance. All I am saying is that the role of NBFCs in investing new credit avenues or creating new markets should be accepted.
How confident are you of maintain the high market share given the competition from non-banks and more so from commercial banks?
Given our unmatchable strength in terms of branches, people and most importantly the trust that the public has in us, I am fully confident that we can maintain the market share as the sector is going to grow at 30% or so going forward, because we could over the years change the market from being an emergency credit window to a productive credit avenue.
We have the branches, we have the people, we have the systems in place. And so naturally, if the sector grows, the prime mover should also grow. But definitely, since we already have the network systems, everything in place, we should be able to move ahead of others. What is your branch expansion plan for this fiscal? Maybe, maybe we would be adding 500, 600 branches. That's our plan.
Can you retain the 90% share of gold loans in your overall business going forward? Don’t you see a high concentration risk?
I don’t think am want to change this ratio. I would be happy maintaining this ratio. Where is the concentration risk when your business is secured 125%? Because the two divisions, housing loans and the microfinance loans, they are growing at a small pace only.
The microfinance industry has been in the woods for more than two years now. How is your business doing now?
Yes, we are out of the woods, thankfully. And I hope we maintain the good asset quality level we have come back to.
