Muthoot Finance is expanding into the microfinance space through its arm Belstar. There will be an equity infusion of Rs 275 crore into Belstar and Muthoot’s stake post the fund infusion will be around 60 percent.

To understand the company's rationale in entering the microfinance space, CNBC-TV18 spoke to George Alexander Muthoot, MD, Muthoot Finance.

Muthoot explained the rationale behind the company’s decision to expand in the microfinance space. He said that purchasing power at lower levels is through microfinance and that the public needs it. He added that Belstar has done a good job in running its business as well hence the company decided to invest money into it. However, he clarified that the company’s investments in microfinance institutions is miniscule.

"We always felt that microfinance is something which is definitely needed by the public and it is the best way to put money in the hands of people. Purchasing power at the lower level is through microfinance and microfinance have done a good job there," he said.

"Belstar has done a fine job till now. That is why we are also putting additional capital. The investment in MFI is just a small trickle. Our net worth is more than Rs 16,000 crore and the investment in MFI is only about Rs 50 crore. It's just a miniscule part," he said.

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He mentioned that firm gold prices have helped the company on the collateral safety side. Q4 has been good and the upcoming quarters look promising, he mentioned.

"On the collateral safety side, gold price is holding up, that is definitely helping us on the collateral side. But then it is the demand also. The demand for gold loan has started picking up, Q3 was good but we had to auction quite a lot of money. But still we were able to maintain the level even with the auctions," he said.

"Q4 has also been good. And we see next quarters, that is Q1, Q2 of next year to be quite promising because economic activity has really started picking up.," he added.

Watch the video for the full interview.

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First Published:Mar 29, 2022 12:48 PM IST