Muthoot Microfin eyes festive demand with consumer durable loans: CEO

CEO Sadaf Sayeed says the lender plans to diversify beyond group lending, expand digital offerings and target ₹30,000 crore in assets under management by 2030

Muthoot Microfin plans to launch consumer durable loans ahead of the festive season and expand its digital lending offerings as the microfinance lender steps up its push beyond traditional group lending, Chief Executive Officer Sadaf Sayeed said on Thursday.

 

"A couple of products are in the pipeline. One is the consumer durable loans, considering the festive season ahead. A lot of our customers are aspirational households, they would need such facility to buy a new refrigerator, buying a new two-wheeler, or buying a new mobile phone," Sayeed said in a post-earnings interaction with Krity Ambey and Shubham Kumar on the sidelines of the Sa-Dhan National Conference in New Delhi. The lender released its July-September earnings on Thursday.

 

The company is also looking to expand its digital loan product, Suvidha Plus, which allows customers to complete the entire loan journey digitally in about 30 minutes, Sayeed added. Edited excerpts:

 

Your branch presence is mostly in South India and Assam. Any plans for geographic expansion?

 

We operate across 22 states. Starting from Kerala, we naturally have a strong southern presence, but our strategy targets a 50:50 mix between the South and the rest of India. Currently, our portfolio is 23 per cent in the North, 16 per cent in the West, and the balance in the East. Growth remains slightly higher in the South due to our long-standing presence there.

 

Is this geographic mix viable for you?

 

Yes, it aligns with our strategy. We strictly ensure no single state exceeds 25 per cent of our portfolio.

 

Do you plan to expand your current network of 1,675 branches?

 

Yes, we target opening 30 new branches this financial year. Following last year's expansion into Assam, Telangana, and Andhra Pradesh, we are deepening our presence there to acquire new customers. We will also open branches in existing markets like Tamil Nadu, Kerala, Uttar Pradesh, and Bihar.

 

Where do you stand on branch additions at the end of H1?

 

We are balancing physical expansion with a focus on horizontal growth through product diversification. We introduced individual loans (portfolio: ₹4,165 crore with near-zero delinquency), gold loans (disbursing ₹150 crore monthly via a co-lending partnership with Muthoot Finance), and loans against property (portfolio: ₹92 crore). These cross-sell options serve our existing customer base of 3.2 million without overleveraging them.

 

Are any other products in the pipeline?

 

Yes, consumer durable loans for the festive season and digital loans called Suvidha Plus. Over 2.1 million of our 3.2 million customers use our app, enabling end-to-end digital loan disbursal within 30 minutes, straight to the borrower without needing field officers.

 

Are you using artificial intelligence (AI) for credit underwriting?

 

Yes, we partner with Bengaluru-based Able Credit to use generative AI. Conversations between credit officers and customers in local languages are recorded, transcribed, translated into English, and automatically populated into a Credit Appraisal Memo alongside bureau data, account aggregator information, and internal scores within 30 minutes.

 

How long have you used this AI tool?

 

For over a year. It powers our entire individual loan portfolio, maintaining a 0 per cent delinquency rate.

 

What is your target product mix?

 

Under our "30-30 Vision", we target ₹30,000 crore in assets under management (AUM) by 2030, with a 55 per cent JLG (joint liability group) and 45 per cent non-JLG split. Within non-JLG, individual loans will form 30 per cent, loans against property will be 10 per cent, and gold loans will be 5 per cent.

 

Though the regulation is 60:40, we will make sure that on the balance sheet we have 60 per cent JLG loans, but the overall AUM mix would be 55:45.

 

Why shift towards a 55:45 split when the regulator prescribes 60:40?

 

To reduce single-product vulnerability. The RBI's increase in the non-qualifying portfolio cap to 40 per cent allows us to diversify into more stable, higher-margin income streams.

 

Will recent RBI rate increases impact your cost of funds, which eased considerably in Q2?

 

The impact will be minimal. Only around 30 per cent of our borrowings are at variable rates. Supported by ₹6,000 crore in available liquidity/sanctions and a Q1 credit rating upgrade to AA-, our cost of funds fell 20 basis points (bps) this quarter. We remain confident of achieving our 12.5 per cent net interest margin (NIM) guidance for FY27.

 

Do factors like the West Asia conflict or El Niño pose asset quality risks?

 

The main risk is prolonged food inflation (9-12 months), which affects microfinance budgets. However, normal crop sowing should keep prices stable. Direct geopolitical or gas-price impacts were temporary and successfully mitigated.

  

What is your top operational priority going ahead?

 

Digital inclusion. Our digital collections rose from 40 per cent to 47 per cent recently, and we expect to hit our target of 75 per cent digital collections well before 2030.