Demand in non-metro, rural areas will only grow: Mr. Abhinav Iyer, Muthoot Finance

Muthoot Finance has had a very high focus on non-metro, semi-urban and rural areas and these markets have always helped the company pull the averages, said Mr. Abhinav Iyer, Head of Marketing & Strategy, Muthoot Finance. According to him, the demand in non-metro, semi-urban and rural areas will only grow with the passage of time. Mr. Iyer was speaking at a webinar organized recently by the Dainik Bhaskar group in association with exchange4media.

Speaking at the discussion, part of a series titled: ‘Non-Metros: Driving the Economic Resurgence’, Mr. Iyer explained how his company managed to tide over the COVID-19 storm and emerged unscathed in its aftermath. During the webinar on ‘Bharat: The Festive Momentum Continues’, Mr. Iyer also spoke about how the gold loan category promises to be a beneficiary on account of the momentum in tier-II and tier-III cities. The session was chaired by exchange4media Co-founder Mr. Nawal Ahuja.

BFSI sector has had a very mixed story over the last few years. It is the bellwether for the entire economy in terms of people spending and saving money. When asked about his experience with the sector post the lockdown and the festive season, Mr Iyer said, “We are one of those companies that have less to complain, and we are very happy to share that the last nine months have been buoyant for us. We have done well on new customer acquisition, and business as a whole.”

“If I take a step back, the preceding year, pre-COVID, was quite challenging for many sectors. But for us, within the gold loan space, it's been a very good year being the category leader. We closed on a high note with about 51 per cent growth in our profitability. We grew from Rs 2100 crore to Rs 3200 crore in our PAT in the last financial year. During COVID, we were one of the first companies to get back on our feet because we were a part of essential services,” he said.

“The firm closed the first half of the year with 29 per cent growth in our profitability, and about 30 per cent growth in our book size. We have less to complain about when compared to most other sectors, or companies within financial services. I'm happy to share that we have had a very high focus on non-metro, semi-urban and rural areas traditionally. We have 5,330 branches spread across all of India. More than 70 per cent of these branches have always been in semi-urban and rural areas. It's driven by the fact that India is one of the largest consumers of gold. India contributes 23 per cent to the global gold demand, and two-third of that 23 per cent originates from the hinterlands. Nearly 60 per cent of my staff members are based in the 70 per cent of the branches in the rural markets. And 55 per cent of our new customer acquisition happens from the non-metro markets,” shared Mr. Iyer.

He further added, “There is a huge digital penetration which is happening in non-metros, and if you look at the number of app downloads for our online transactions or digital transactions, semi-urban and rural markets contribute about 55-60 per cent of those transactions. These markets have been the big boulders in the bucket for us, and they've always helped us pull the averages. In the last two-three years, we have opened about 250 branches, and more than 85 per cent of these branches are in non-metro, semi-urban areas.”

Commenting on how he sees things shaping up from here on, Mr. Iyer said, the demand will only grow with the passage of time because it is getting more homogeneous. “The economic wellness of people in semi-urban, rural, non-metro areas is also increasing as we speak. The government is investing in developing these markets, whether it is through MNREGA or other schemes. The story is only going to continue for us,” he shared.

When asked what does 2021 hold in store, Mr Iyer remarked, “I would not like to do away with 2020 because it's been a great year for us and the industry within the gold loan segment. We see growth from an AUM (Assets Under Management) and book size perspective to go northwards. I see some recalibration happening on the market prioritizations. When we look at non-metros, that's a consumer who actually needs greater awareness about better value propositions, whereas from an urban customer segment, it's the digital adoption which is getting expedited.”

“When we, as a brand, look at these two markets, we are looking at launching new products like loan at home, where consumers in the urban elite would like to avail gold loans from the convenience of their home, or would like to make payments online. When it comes to non-metros, that's where people, from a product perspective, are quite aware about how gold loans work. There is no inhibition per se, because films like ‘Do Bigha Zameen’ and ‘Mother India’ have contributed to our industry. It's about educating them with a better alternative as against a pawnbroker who's operating at 4 per cent or 5 per cent per month. We are a brand which offer loans at a much lower rate of interest. Trust is something which is the bedrock of all relationships, especially in a business like ours where you're letting go of an emotional asset, it's not just jewellery. We can take humble pride in that because of our network, and our legacy of 133 years,” he added.

When asked if advertising spends will be fully back this year, he said, “When it comes to media spends, with all humility, I'll say we were the first one to launch a campaign right when things were looking extremely gloomy. We launched our campaign in the middle of May; our first print ad went on June 6 last year. It's remained the same for us. It's only going to continue from here because our branch network, our customer base, our growth parameters, everything has contributed. We have been in a land of milk and honey. I'm an optimist and I think it's only going to grow from here.”