Muthoot Pappachan Plans Strategic Investments In Fintech Start-ups

New Delhi: Muthoot Pappachan Group, a Kerala-based lending and financial services conglomerate, plans to make strategic investments in fintech start-ups as part of a larger digital transformation exercise to drive synergies and profitability among its business units, as it chalks out a plan to list its flagship lending arm Muthoot Fincorp Ltd, a top company executive said.

“We are talking to a number of proven start-ups in credit appraisal for our segment of customers, disbursements and collections. Any platform and solutions which will enable our go-to market strategy is our look-out,” chairman and managing director Thomas John Muthoot said in an interview.

The group may look to invest $1-5 million in each deal, he added. The premise of the effort is to familiarise itself with and adopt new technologies in financial services and modernise operations at the group level.

Muthoot Pappachan recently invested in two start-ups: peer-to-peer lending platform Faircent and RemitGuru, that offers online money transfer service to Indians settled abroad.

“We have tie-ups with all major money transfer companies and are also a principal agent for Western Union, so for inward remittance we will drive all major corridors into India through our branches,” Muthoot said. All future investments will similarly be in business areas where the group already has a presence, he added.

A key focus is technology solutions that will help the organisation disburse loans faster and conveniently to its target low-income customers. This will be achieved by exploring non-traditional data sources for credit appraisal, innovative repayment models and assistive technology solutions at branches.

Counted among India’s largest non-banking financial services companies (NBFC) with total assets under management equivalent to Rs10,347 crore as of 31 March, Muthoot Fincorp, the group’s main unit, operates a network of 3,483 branches across 18 states.

“Being a legacy company with 130 years of continued existence and 25,000 employees across India, getting into new ways of doing business is paramount for us. What we have adopted is (a strategy) to prepare ourselves for the next generation,” said Muthoot.

The group is in the process of shortlisting consultants to advice on ways to digitise operations and improve profitability and collaboration across units.

It is also building an internal data analytics division that will apply artificial intelligence and machine learning to better use data from 60,000-70,000 customer engagements its various businesses receive each day.

Besides Muthoot Fincorp, the group comprises a housing finance subsidiary Muthoot Housing Finance Co. Ltd, publicly traded two-wheeler financing arm Muthoot Capital Services Ltd, micro finance unit Muthoot Microfin Ltd, and insurance broking firm Muthoot Risk and Insurance Broking Services Pvt. Ltd, among some other non-financial business units.

The effort is also expected to increase operational efficiencies as it firms up plans for an initial public offering (IPO) of Muthoot Fincrop. “By 2020 we will get it (Muthoot Fincorp) listed… We will strive hard on the profitability pillar here,” said Muthoot.

He added that Muthoot Fincorp recently got Reserve Bank of India’s approval to open 200 more branches, a large part of which is planned in Northern and North-Eastern states. About 800 people will be hired as part of this expansion.