Muthoot Finance links up with AAF to regain the glitter of Sri Lanka’s gold loan business
View(s):With the aim of regaining the glitter of the gold loan business in Sri Lanka, Muthoot Finance Ltd, a Kerala-based gold financing firm has forayed into Sri Lanka by acquiring a 51 per cent stake in Asia Asset Finance PLC (AAF).
Muthoot has activated AAF gold loan business providing India’s know how and training in handling and promoting the business for Sri Lankan staff, Managing Director of Muthoot Group George Alexander Muthoot told the Business Times on the sidelines of the launch of the joint venture partnership in Colombo.
The AAF gold business is operational through seven branches in Sri Lanka. The company has maintained the cost of borrowing steady at end June 2015, while it is expecting a decline in borrowing cost moving ahead, he revealed.
Mr. Muthoot said the profile of the customers in Sri Lanka is similar to that of Indian customers and it will be easy for the company to scale up its gold loan business in the island nation.
However, the only issue was that it is a much smaller market compared to India, he added.
The new tie up will cap the interest rates at a reasonable level and also allow the AAF to maintain the loan-to-value (LTV) ratio up to 70- 80 per cent to revive growth in the segment to support credit flows to the economy, while mitigating the asset quality risk, he pointed out.
However, with the new acquisition, he said, there is a huge business opportunity in Sri Lanka where gold consumption is similar to that of India. Besides, the markets foresee new growth opportunities in the company’s performance with the introduction of gold loan business, he added.
Muthoot Finance currently operates through over 4,400 branches in India, offering services in gold loans, money transfers, wealth management services, foreign exchange and many other diversified services such as travel and tourism.
The company has made massive investments in the UK, US, and the UAE, he said, adding that the company now believes that the economy of Sri Lanka is equipped for investment by its stability and strategic positioning.
After the successful completion of the rights issue, Muthoot Finance is now the major shareholder of AAF, mainly offering finance services for personal and corporate needs, he disclosed.
The local company has a countrywide branch network in Colombo, Negombo, Gampaha, Wennappuwa, Batticaloa, Jaffna, Kilinochchi, Moratuwa, Kalutara, Kurunegala and Galle.
Outlining the new strategic partnership with the Kerala company, H.L.L.M. Nanayakkara, Chairman of AAF expressed the belief that the relationship formed with Muthoot Finance will take the company to greater heights and help achieve new milestones.
He disclosed that plans have already been devised to make AAF one of the top finance companies in Sri Lanka.
“As a pioneering finance company, already well-established in the Sri Lankan market, Asia Asset is on an upward trend that can only profit further with the added expertise and synergies of Muthoot Finance, which has over 128 years of experience and knowledge in the industry,” he added.
He noted that with the pooling of these resources of the two entities, the company expects to expand the branch network and products within the course of the coming year.
Rajiv Gunawardena – Chief Executive Officer (CEO) of AAF told the Business Times that the company has recorded the highest profit of Rs.100 million which was a 100 per cent YOY growth.
He noted that the strategy for the next two quarters of the financial year is to hold this momentum which would see AAF being pushed to being in the top 10 finance companies in the industry.
The company has made plans to increase the reach with 15 more branches within the next two years with the proposed addition of new branches in the Central, North Central, Uva and Sabaragamuwa provinces, he revealed.
(Bandula)