FROM GOLD TO GOLD +, THE STRATEGY HAS DELIVERED – V.P.NANDAKUMAR

Our performance may be attributed to two important factors. Firstly, the new business model we have adopted in gold loans and secondly, our diversification into new business areas. These two measures have enabled us to significantly contain the risks inherent in the business.

Speaking of risk, there are two big risks we face as an NBFC focused exclusively on gold loans. The commodity price risk or the risk of suffering losses when the price of gold falls. Over the last one year, we succeeded in containing price risk with a new business model emphasising short term gold loans as compared to the standard tenure of one year.

The concentration risk arises because we were focusing exclusively on gold loans and it made us vulnerable to volatility specific to our industry. Financial sector regulators in India have frequently expressed concern over the concentration risk inherent in our business model. To assuage their concerns, we initiated a series of bold moves to become a multi product company. Of course, we did this after due diligence and after satisfying ourselves about prospects for growth in the proposed areas of business.

We diversified aggressively into microfinance, home loans, vehicle loans and SME lending. In February 2015, we acquired Asirvad Microfinance Pvt. Ltd. whose AUM was a little short of Rs.300 crore. Today, less than a year after it became our subsidiary, the company’s AUM has more than doubled to Rs.700 crore. The microfinance industry in India is doing well these days. And so, by the end of March this year, we expect microfinance to contribute a thousand crore worth of business. We have also diversified into commercial vehicle loans, housing finance and SME loans with promising results. Put together, these businesses now contribute Rs. 212.43 crore to the total AUM, up from Rs. 145.6 crore in the preceding quarter. Expressed as a percentage of our total assets, all the new businesses, from microfinance to housing, commercial vehicle and SME loans, now contribute 8.88 percent of our consolidated AUM. Around this time last year, it was practically next to nothing. Today, we are confident our new businesses will contribute 25 percent of total AUM within the next three years. The concentration risk will soon be a thing of the past.

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