Muthoot Microfin expects 25-30% growth in loan disbursals in 2023-24

The third largest microlender Muthoot Microfin expects to disburse 25-30 per cent more loans this fiscal, taking its assets to around Rs 12,000 crore.

The Kerala-based firm, promoted by the diversified Muthoot Pappachen Group that's more known for its flagship gold loan business, closed FY23 with a loan book of Rs 9,209 crore and a likely net income of Rs 200 crore.

In the pandemic-hit FY22, its loan book stood at Rs 6,300 crore from which it had earned Rs 79 crore of net income, chief executive Sadaf Sayeed told PTI.

He attributed the massive loan book expansion to the low base in the pandemic hit year, and bases his optimism to maintain the momentum on the rising need for liquidity among its customers, even though the interest rates have risen.

Given rising rates and the resultant higher spread, he expects a margin expansion and close the current fiscal with at least Rs 350 crore of profit. Sayeed said margin has improved from 10 per cent pre-May 2022 to over 12 per cent now.

He also bases his optimism of higher loan demand as the company is entering Telengana and Andhra--the two states that had crippled the industry towards the middle of last fiscal when the undivided Andhra Pradesh (the then largest MFI market) had banned private sector microfinance companies apart from capping interest rates along with a moratorium on repayments.

The company will also be entering Rajasthan this year, and has already entered Uttarakhand and Himachal earlier this year.

These new markets should drive in a lot of the incremental loan demand, he said, adding with the addition of Andhra and Telengana our geographical reach will widen to 18 states.

The move to enter these lucrative markets follows a Hyderabad high court verdict in February this year, which allowed any RBI-regulated MFIs to operate in the two states, and that such entities will not be under state regulations.

Muthoot Microfin, backed by two US-based private equity funds-- Greater Pacific Capital and Creation Investments Capital Management--serves over 2.77 million customers as of March 2023, which grew from 2.1 million in FY22.

Greater Pacific Capital entered the company with USD 60 million in December 2021 for a 14 per cent stake and picked an additional 2.7 per cent in December 2022 for USD 20 million. Creation Capital, which is a US-based alternative investment firm, first came on board in December 2016 with Rs 100 crore and pumped in Rs 30 crore later and then gave in Rs 27 crore more through the recent rights issue. It owns 9.3 per cent of the company now.

Of the rest of the equity, the promoters the Muthoot family owns 71 per cent and the rest are with employees through Esops.

Sayeed, who was earlier with Spandana Sphoorty Financial, Indiabulls Financial Services, Satin Creditcare, HDFC Bank and GE Money, said the company has fully come out of the pandemic pains and the repayment was 99.7 per cent in FY23.