Muthoot Capital Services Limited (MCSL), a Muthoot Pappachan group company, will soon launch an innovative loan product – loan against gold Exchange Traded Fund (ETF). The Kochi-based NBFC plans to introduce the new product by June this year with an option to lend 75-80 per cent of the total value of the ETF.
According to Thomas George Muthoot, managing director, this would be the first such loan portfolio in India. Addressing media persons here today, he said the customers had to pledge the ETF for availing the loan facility as they do in the case of physical gold loan. Once the loan is repaid fully the pledge would be released.
In the case of default, the ETF in demat form would be transferred to the depository account of the company. The gold ETF is treated as collateral equivalent to physical gold. He said the company wanted to have more liquidity in ETF and the investors would get a new avenue for raising funds against investment.
He said the new product would also benefit the company as it would reduce the risk on clients and save cost in jewelery valuation, physical handling of ornaments and storage cost. This would also expand the geographical reach and customer base as ETF can be accepted online.
According to him, currently around 3 lakh people actively invest in gold ETF across the country. In a way, this will ensure more business in future. The term of loan will be 3 -36 months and the loan amount ranges from Rs 50,000-50 lakh, and a diminishing interest rate of 24 per cent will be applicable.
The company has recently introduced the Smart Plus auto loan through which the full cost of the vehicle is given as loan. In this segment, the company is aiming to become the leading player in south India by 2013, said R. Manomohan, Chief Executive Officer.
In the current financial year, auto loan disbursement would be in the range of Rs 250 -300 crore in the south. Last year, Rs 138 crore was disbursed.
The rights issue of the group will be opened by the end of this May. The company now awaits the clearance from SEBI and the issue price is yet to decide. The ratio will be 1:1.
Thomas George also said that 600 more branches would be added in the current financial year taking the total number of branches to 1900. The main focus of branch expansion is north India.
Net profit up
MCSL has earned a net profit of Rs 2.67 crore in the last quarter of 2010-11 as against Rs 2.06 crore in the same period of previous fiscal. This records a growth of 29.6 per cent. Total income during the period increased 74.19 per cent from Rs 6.62 crore to Rs 11.53 crore.