A golden opportunity

COLUMN: AT THE HELM

George Alexander Muthoot, the managing director of the Muthoot Group, says that gold loans have been the corner-store of their business for the past seventy years

By Shevlin Sebastian

When George Alexander Muthoot, the managing director of the Muthoot Group arrives at 9 a.m. at his office in Kochi, 200 staffers are gathered around for a prayer. “It is a universal prayer,” says Alexander.

Here are a few lines: ‘God, we thank you for all the blessings showered on us yesterday. God, we pray for your blessings to give a great today. God, we pray to lead us to a much higher level of excellence in all our activities.’

This prayer is said by 10,000 employees in 1700 branches all over India. This is followed by a short talk: it could be about the business or about improving communication skills or customer relations. “This is done by one of the staffers,” says Alexander. Fifteen minutes later, everybody goes to their desks.

Alexander spends the day meeting with various departmental heads. “Most of the time I am discussing policy matters,” he says. “The business environment is very competitive these days. So we have to keep abreast of what our competition is doing.”

Since the company is primarily into finance and loans, their main competition is from public and private sector banks. “We keep track of their schemes, plans, and rates of interest,” says Alexander. “I encourage employees to come up with suggestions. Sometimes we will tweak our schemes so that we can gain an advantage.”

However, the Muthoot Group’s money-spinner is the gold loans, an innovative idea which was introduced by Alexander’s father, M. George Muthoot and his brothers, way back in 1939.

“This is our bread and butter,” says Alexander. The concept is simple. Suppose a person needs cash desperately. He can pledge his jewellery, and take money in exchange.

“The majority of our customers are small businessmen,” says Alexander. “They are expecting a payment which has not come through. But they have an urgent need to buy some material. So they take a gold loan.”

The loans start at Rs 2000 and go upwards till Rs 2 lakh. But the average amount is Rs 20,000. It is given for a year and the interest rates vary from 12 to 23 per cent, depending upon the amount. “There is no pre-payment penalty,” says Alexander.

Since there is a possibility of spuriousness in gold, the staff is specifically trained to evaluate it. “Only a few customers come with the intention to cheat,” says Alexander.

Thanks to the gold loans, during the worldwide recession in 2008-9, the company boomed. “At that time banks stopped giving loans, but we didn’t,” says Alexander. “Gold is always a good collateral.” Today, the company distributes loans worth Rs 100 crore a day.

They also make gold coins. “We buy 1 and 5 kg gold bars and convert it into coins,” says Alexander. “People invest in land, bank deposits, mutual funds, post office deposits, and shares. We encourage them to buy gold coins also.”

On Akshaya Tritiya, on May 16, when buying gold is considered auspicious, the group hopes to sell 300 kilos.

The Muthoot group has diversified in recent times. They do money transfers, foreign exchange, leisure and hospitality, housing and infrastructure, wealth management, health care and education, to name a few. And they have a social commitment also.

The group has set up the Muthoot M. George Foundation, which provides free medical treatment, provides money for marriages of poor girls, helps in the education of poor students, and sponsors kidney dialysis treatments.

“Since kidney ailments do not have a cure, as yet, we have instituted an award of Rs 1 lakh for the best research done by a young doctor in nephrology,” says Alexander. “These initiatives have given me a lot of satisfaction.” This year the company spent Rs 2.5 crore on their humanitarian projects.

Apart from Alexander, there are three other brothers: M.G. George (chairman), George Jacob and George Thomas (joint managing directors). “Our strength is our family unity,” he says.

But Alexander admits that the family was deeply pained by the brutal murder of the chairman’s son, Paul Muthoot, by unknown assailants, in August, 2009. “But we are moving on, despite the tragedy,” he says.

Today, the company is booming and has disbursed funds worth Rs 30,000 crore.

A self-confessed workaholic, Alexander leaves the office at 8 p.m. At home, his favourite pastime is reading fiction. Alexander’s current books include ‘Zero Percentile – Missed IIT, Killed Russia,’ by Neeraj Chhibba. “It is similar to Chetan Bhagat’s books,” he says.

In his spare time Alexander also likes to stay in touch with his children. One son, George, is doing his MBA in North Carolina, USA, while Eapen is doing his masters from the London School of Economics.

So what are the future business prospects in Kerala? “The state is well represented by banks and financial institutions,” says Alexander. “We are looking for growth outside.”

(The New Indian Express, Kochi)