Muthoot Microfin:-

Muthoot Microfin, the third largest microlender, is anticipating a 25-30 percent increase in Loan disbursement during this fiscal year. It will bring the company's assets to approximately Rs 12,000 crore. The firm is based in Kerala and is promoted by the Muthoot Pappachan Group, mainly recognized for its flagship gold loan business. Muthoot Microfin's loan book for FY23 stood at Rs 9,209 crore, and it is expected to have a net income of Rs 200 crore.

According to Sadaf Sayeed, the chief executive officer, Muthoot Microfin had a loan book of Rs 6,300 crore in FY22, which was impacted by the pandemic. During this period, the company earned a net income of Rs 79 crore. Sayeed shared this information with PTI.

The CEO credited the substantial growth in the loan book to the low base in the pandemic-affected year. He remains optimistic about maintaining this growth momentum, citing the increasing demand for liquidity among customers, despite the rising interest rates.

Sadaf Sayeed expects a margin expansion due to the rising rates, resulting in a higher spread. He anticipates that the current fiscal year will close with a profit of at least Rs 350 crore. According to Sayeed, the margin has improved from 10 percent before May 2022 to over 12 percent presently. 

The CEO is also optimistic about the company's loan demand as it enters Telangana and Andhra, two states that had severely impacted the industry in the middle of the previous fiscal year. It was due to the undivided Andhra Pradesh, the largest MFI market at the time, banning private sector microfinance companies, capping interest rates, and imposing a moratorium on repayments.

Muthoot Microfin has plans to enter Rajasthan this year, having already entered Uttarakhand and Himachal earlier in the year. The CEO believes that these new markets will generate significant incremental loan demand. With the inclusion of Andhra Pradesh and Telangana, the company's geographical reach will expand to 18 states.

Muthoot Microfin's decision to enter these profitable markets comes after a Hyderabad high court ruling in February this year. The ruling allowed any MFIs regulated by the RBI to operate in Andhra Pradesh and Telangana without being subject to state regulations. Muthoot Microfin is supported by two US-based private equity funds, Greater Pacific Capital and Creation Investments Capital Management. As of March 2023, the company serves over 2.77 million customers, an increase from 2.1 million in FY22.

In December 2021, Greater Pacific Capital invested USD 60 million in Muthoot Microfin, acquiring a 14 percent stake in the company. The private equity firm then went on to purchase an additional 2.7 percent stake in the company for USD 20 million in December 2022. Creation Capital, another US-based alternative investment firm, first invested in Muthoot Microfin in December 2016, putting in Rs 100 crore. The firm later invested Rs 30 crore and contributed Rs 27 crore through a recent rights issue, which gave it total ownership of 9.3 percent in the company.

As of now, the Muthoot family owns 71 percent of the company's equity, with the remaining held by the employees through Esops. With Greater Pacific Capital and Creation Capital holding sizeable stakes in the company, Muthoot Microfin can leverage its expertise to drive growth in the new markets it is entering. The company can also benefit from its financial backing to pursue its expansion plans more aggressively.

Sadaf Sayeed, who has previously worked with companies like Spandana Sphoorty Financial, Indiabulls Financial Services, Satin Creditcare, HDFC Bank, and GE Money, has stated that Muthoot Microfin has successfully overcome the challenges posed by the pandemic. 

He further added that the company achieved a repayment rate of 99.7 percent in FY23, which is a testament to the strength of its operations and its commitment to customer satisfaction. Sayeed's experience in the financial services industry and his leadership at Muthoot Microfin have been instrumental in driving the company's growth and establishing it as a key player in the microfinance sector.

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