Belstar Microfinance, a subsidiary of Muthoot Finance is likely to launch an initial public offering in the next 12 months, Managing Director George Alexander Muthoot said. He tells Ajay Ramanathan that the company has requested the Reserve Bank of India (RBI) for a deposit license.
Q. You recently launched business loans for MSMEs. What is your strategy on this segment?
A. We recently started business loans for the MSME segment. It is at a nascent stage and we have started operations in 15 cities today. While we have not fixed a target, we will probably hit Rs 150 crore of assets by the end of this financial year. This portfolio size will rise as we launch operations in more cities.
Q. What are your plans for the microfinance, home loan, and vehicle subsidiaries? Are you looking at an IPO or a capital infusion into any of these?
A. We have not considered anything on the subsidiaries at large. These are all small companies. But then, the microfinance subsidiary Belstar is looking at an initial public offering in the next 12 months. Nothing is finalised yet. The board is currently talking to investment bankers.
Q. Which products will drive your growth in the current financial year?
A. In terms of products, I think we are present almost everywhere. Our microfinance, affordable homes, personal loan to salaried customers, personal loan to business people are growing. The strategy is to increase the assets under management of each of these segments going forward. Since the base is small, we should achieve a better growth in each of these segments. Currently, the non-gold segment comprises 12% of the overall loan portfolio. This will rise to 20% in the next five years.
Q. Reserve Bank of India(RBI) has expressed some discomfort with the rising share of unsecured personal loans in the banking industry? How has your unsecured portfolio behaved in terms of collection and repayment?
A. We are in touch with our customers at the grass-root level. We have not seen a spike in defaults in recent quarters. As usual, Muthoot is a very conservative company. We are very choosy with respect to whom we give a loan. We would like to generate leads from our existing gold loan customers. The gold loan customers that come to our branch may want a personal salaried loan or a business loan. We try to first give it to our existing gold loan customers who have some business transactions or record with us. While we will also target new customers, a good chunk of the business will come from existing customers. Currently, unsecured loans comprise around 9% of the overall portfolio.
Q. RBI has in recent times, been reluctant to grant deposit licenses to NBFCs. Do you believe that there should be some reconsideration on this?
A. While many upper-layer NBFCs are allowed to accept deposits, four or five of us do not have the permission to do so. We would want to have that permission. In a recent meeting, we have requested the RBI to allow us to accept deposits. At the upper layer, we are almost as well regulated as a bank. There should not be any discomfort from RBI to permit us. Also, RBI has always been saying that we should diversify our funding mix and reduce dependence on bank loans. In addition to bank loans, we can raise funds by accessing the capital market. If deposits are also made available, it would be a good diversification of our funding portfolio. We have put forth this request to the Governor and RBI through the Finance Industry Development Council and other industry bodies. I am sure that they will look into this.