ground zero case_study_2
TRANSCRIPT
SWAGAT MISHRA SHANTANU WAGLE [email protected] [email protected] 8652000120 9819168618
SANDEEP NAYAK [email protected]
7738838207
• Muthoot Finance Ltd, the largest gold financing NBFC in the Country with an Asset Under Management of Rs.21,000Crores and more than 4,200 Branches spread across the Country.
• The company is a “Systemically
Important Non-‐deposit taking NBFC” headquartered in the southern Indian state of Kerala.
• OperaUng history of Muthoot Finance
has evolved over a period of 75 years since M George Muthoot founded a gold loan business in 1939 under the heritage of a trading business established by his father, Ninan Mathai Muthoot, in 1887.
• The company is publicly listed and has a very strong presence in the semi urban and rural heartland of India.
Additionally, there was also a steady decline in the gold prices, which prompted some of Muthoot’s customers to abandon their gold,
as they found that buying gold from the market will work out cheaper than settling the dues in the loan account to redeem the
pledged ornaments. These factors lead to an accumulation of Non-Performing Assets.
History Of Muthroot
Executive Summary
Case ObjecUve
Study on gold backed credit cards on the current market trends
feasibility/scope of such a product in India
Gold Price in the last 5 years
Analysis • Gold demand in India declined by 26% to 190.3
tonne during the January-‐March quarter due to higher import duUes and supply curbs imposed by the government
• In the first quarter (Q1) of 2013, the gold demand in the country had logged in 257.5 tonne, according to WGC Gold Demand Trends report.
• In value terms, gold demand witnessed a fall of 33% to Rs 48,853 crore during the first quarter of 2014, compared to Rs 73,183.6 crore in Q1, 2013.
0 200 400 600 800 1000 1200
Demand in Tonnes
Growth
Analysis • Gold prices has been dropping consistently in
the domesUc bullion market here on emergence of fresh selling by stockiests and investors triggered by a wider overnight global sell-‐off.
• The fall in gold prices in India has largely remained stable over the last three months.
• A stable rupee means that the percentage decline in gold prices in rupee terms will be in line with the fall in dollar terms.
Current market trends in gold?
Analysis • 75 per cent of gold demand in India has taken the form of jewellery.
• More than two-‐thirds of that demand comes from the country’s rural populaUon, where a deep affinity for gold goes hand in hand with pracUcal consideraUons of the portability and security of jewellery as an investment.
• regional fesUvals are celebrated with gold: in the south, Akshaya TriUya, Pongal, Onam and Ugadi; in the east, Durga Puja; in the west, Gudi Pavda; in the north, Baisakhi and Karva Chauth.
• Gold is central to more personal life events too. Gihing gold is a deeply ingrained part of marriage rituals in Indian society—weddings generate approximately 50 per cent of annual gold demand.
• Families begin saving soon aher the birth of a girl, and the ‘Stridhan’, or gih of gold to the bride, gives her financial security once she is married.
• Over the next decade, there are likely to be 15
million weddings per year in India, where more than half of the populaUon is under 25.
10
40 15
25
Region wise Demand(in %)
North
South
East
West
Analysis • The demand for gold in India is: • South India states accounUng for around 40 % of the annual demand, • Followed by the West (25 %), • North (20-‐25 %) and • East (10-‐15%). • Rural India accounts for about 65 per cent of total gold stock in the country • Banks view gold loans for agriculture as a safer means to meet their priority sector lending targets • Commercial banks, cooperaUve banks and gold loan NBFCs Major players. • Thousand of branches spread all over the India.
Analysis • Gold emerged a champion even over the longer term: it
remained the best-‐performing asset over 10 years • Over a 10-‐year period, the precious handed in returns of
19.5 percent • Over 15 years, gold gained 12.7 percent, best-‐
performing Indian asset over the past five years • over the past five years, gold has outperformed all other
Indian asset classes, including equiUes and bonds.
• Gold offered a 24.3 percent return (pre-‐tax) over the past five years (compounded annual growth rate),
Market Size • The gold loans market now valued at 7.95-‐9 billion
dollars is set to grow manifold as more financial insUtuUons and banks enter the lucraUve business.
• According to an esUmaUon of the Icra Management
ConsulUng Services (IMACS), the organized gold loan-‐market in India stands at $8 billion USD and is growing at a compound annual growth rate of 40 per cent since 2002.
Target Market • Having its roots in southern India, 85 to 90 percent
of the gold loan-‐market exists in states like Andhra Pradesh, Tamil Nadu and Kerala.
• Keralaiets are very much fascinated about purchasing of jewelry. So, because of the large prevalence of jewelry, the jewel loans have relaUvely been higher in Kerala, followed by the other states like Karnataka, Tamil Nadu and Andhra Pradesh.
Consumer Behavior • The easy availability of gold in Indian households
and the minimum chance of consumers defaulUng on loans, is making the loan-‐against-‐gold market grow in the country
• Gold has tradiUonally been a safe asset to almost every household in India. And with changing trends, it has emerged as a convenient means to avail a loan.
Rural focus • Farmers invest returns from kharif crop sales on
precious metals even as prices are set to fall further
• Demand for gold is likely to pick up in rural areas, as prices of the two precious metals are on a downward slide at a Ume when harvesUng of kharif crop has begun in parts of the country and arrivals have started at mandis, generaUng cash flows for the farming community.
• Gold prices have dropped to about Rs 26,560 per 10 gm
Market feasibility
2014 2013 Change
Top line 49,47,43,65,002.76 53,87,13,66,541.09 -‐0.043
Boqom Line 7,80,06,90,535.78 10,04,23,95,229.53 -‐0.022
Business PromoUon Expenses 279445066.2 331920323.3 -‐0.0524
AdverUsement 702157532.8 579143434.2 -‐0.0123
Analysis • The decline of top line and boqom rise has
had its effect on adverUsing and promoUon. • A negaUve 5% in promoUon and adverUsing
is seen
RecommendaUon • For gold credit card we recommend a 2%
increase in promoUon to educate the customer and 1.5% increase adverUsing
Appendix
Source-‐ hqp://firstbiz.firstpost.com/money/and-‐the-‐top-‐indian-‐asset-‐class-‐over-‐the-‐last-‐5-‐years-‐is-‐37929.html hqp://www.gold.org/jewellery/india-‐market hqp://arUcles.economicUmes.indiaUmes.com/2014-‐10-‐07/news/54735618_1_jewellery-‐trade-‐federaUon-‐rural-‐delhi-‐jewellers-‐associaUon-‐gold-‐prices Source: World Gold Council and Es3ma3ons from DGCI&S Data hqp://www.moneycontrol.com/commodity/gold-‐price.html hqp://arUcles.economicUmes.indiaUmes.com/2014-‐10-‐07/news/54735618_1_jewellery-‐trade-‐federaUon-‐rural-‐delhi-‐jewellers-‐associaUon-‐gold-‐prices Muthroot finance Annual report 2014