Indian two thousand and five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)  

Muthoot Capital Says Kerala Floods Will Impact 3% Of Loan Book

Kerala-based Muthoot Capital Services Ltd. said the flood in the state will impact only 3 percent of its loan book.

The company’s exposure in the two districts that are worst-affected is about 8 percent of the overall Kerala books, Chief Operations Officer Madhu Alexiouse told BloombergQuint in an interaction. “That’s 2-3 percent of the company’s overall book.”

Around 40 percent of the company’s loan book, or Rs 950 crore, comes from Kerala, according to Antique Broking.

But a large part of the loan book is under insurance cover, Alexiouse said.

“Almost 68 percent of our portfolio is covered through comprehensive insurance because insurance is mandatory when we do our financing business,” Alexiouse said. While the remaining 32 percent is not covered, he said customers would rather repay the loan instead of spoiling their credit score.

Still, the company expects bad loans from the flood-hit state to rise by Rs 10-12 crore over the next 30-45 days. That’s because people, Alexiouse said, will need this much time to get back to their normal routine of repayment.

“Around November or December, NPAs will start reducing again.”

Growth Potential

There’s a huge growth opportunity for the company over the next five years as it expands into financing used cars and consumer durables, Alexiouse said. “Any product that we launch should give an 18 percent-plus return on equity.”

Also, the two-wheeler business that the company operates in currently has huge headroom to grow, he said. Around 70 percent of all two-wheeler sales happen outside south India, Alexiouse said, adding the company plans to expand across the country with the help of technology.