True Blue Heirs

How the Muthoot Pappachan Group is transforming the family-owned business of gold loans into a full stack financial services provider?

The split of the family business of gold loans, started by patriarch Ninan Mathai Muthoot in 1887 as a trading firm in Kerala, was without any fuss. Thomas John Muthoot, 56, vividly remembers how swiftly the umbilical was cut in 1979. "Everything ended within 10 minutes."

The three sons of Ninan Mathai sat around a table in their ancestral village building in Kozhencherry and amicably settled the matter. "We were just spectators," recounts the chairman and managing director of Muthoot Pappachan Group (MPG), started by John's father Mathew M Thomas, the youngest of the three brothers fondly known as Muthoot Pappachan.

"Everything was divided into three," recalls John from the third generation. M George Muthoot, the eldest brother of Pappachan"

The partition had another unprecedented element to it: Common ownership of the building in Kozhencherry. On Monday and Tuesday, all transactions through walk-ins accrue to the eldest brother (Red Muthoot). The business of the next two days goes to the second brother (Muthoottu). And Friday and Saturday are for the youngest one-Blue Muthoot. "The arrangement is unique,” says John.

Fast forward to 2018. MPG is in the midst of a transformation from a family-run gold loan business to a full stack financial service provider catering to the bottom of the pyramid.

The group has a turnover of a little under ₹3,500 crore, of which Muthoot Fincorp, the gold loan vertical, accounted for ₹2,186 crore in fiscal 2018. In contrast, Muthoot Finance, the flagship gold loan vertical of the red faction, had an income of ₹6,185 crore. Playing catch-up is not a priority for John. "We will not be very aggressive. That's not in our DNA," he asserts. "We do things that are correct."

One of those 'correct' things John may be hoping is Muthoot Microfin. A microfinance company providing loans to low-income woman entrepreneurs, Microfin has emerged as the second biggest revenue contributor to the group in a short span of time: From 250 lakh in FY14 to 459 crores in FY18.

WHO STARTED THE GROUP?

The group was founded by Muthoot NINAN MATHAI in 1887 as a trading company in timber and food grains, supplying rations to large British-run plantations. In 1950s, he got into the gold loan business

WHEN DID FAMILY PARTITION TAKE PLACE?

In 1979, the family business was divided between the four sons of Muthoot Ninan Mathai-Ninan Mathew, M George, M Mathew and Mathew M Thomas, also known as Muthoot Pappachan

RED AND BLUE MUTHOOT

While M George Muthoot branched out with a red logo of two elephants standing trunk-to-trunk and came to be known as Red Muthoot, the gold loan business run by Mathew M Thomas uses the colour blue in its branding. The Blue Muthoot group is known as MPG and run by three brothers

The diversifications are scaling ta time when the group warhorse Fincorp, is growing in single digits Inm a de-growth of 5 percent in FY14 to a 2 percent revenue growth in Fls and 4 percent two years later

Juha's twin brother, younger by a few minutes, Thomas George Mathoot, explains how the group has evolved to cater to the financial sends of the entire spectrum of the low-income segment. "First wild loans, then loans for wherders, next was microfinance Aromall businesses and then housing and so on," says Georg plaining the need to reinforce the bladentity of the group with linest campaign with actor and Arand ambassador Vidya Balan Though the company painted hell Mur in 2010, the confusce w Bed persisted as both the g Muthoot in their business "An family business with multiple group will have an identity crisis, recom Song For a small customer. the best identity is colour."

FOUR PILLARS OF TRANSFORMATION

De transformation has not beetrefaed to diversifying the group winds of iners. Business price uning its blue branding in the The most radical change has be git restructured as well tasollaboration among the van Sefhentuner is crucial Gover ich were wreking in The One Muthool exuerent Crus-selling or levere wer of over 4.100 -which serve overlas Cery day become at supermarket francisvity mming into a primary diaributive died operating officer of Muthor Fincore Thar Muthoon Bluehes huge customer hase cansan opportunity to sell to the other prolixts, "We do not want to be Just a gold loan cortipsany," данетть Ramaswam. While gold lowms would cay as the primary care product, the pcp sees a floodgate of opportunity is tipping into the seeds of its users. Suddenly, a old kun raker became a potemial nsumer for a two-wheeler loan, a Sousing loan or an MSME loan. She auld also be a potential consumer of pld jewellery from Muthoot Exim The second pillar of business transformation is people development Whide a sharper focus on developing he talent of over 26.000 employees assigned to a people developnunt feer, all the group verticals got a sew head over the last two years. Tafonalisation of manpower at thebraach level and a structure Sempower the grassroots.

“We will not be very aggressive. That’s not in our DNA. We are not really bothered about competition. We do things that are correct.”

– Thomas John Muthoot, Chairman and Managing Director, Muthoot Fincorp

“Value is more important than valuation. I am very proud that nearly 50% of our customer base is women, and over 65% of our extended family is women.”

– Thomas George Muthoot, Director, Muthoot Pappachan Group

“An NBFC doesn’t have to trust the customer. In fact, the customer must trust the NBFC — that’s when you gain repeat business. That’s your greatest asset.”

– Thomas Muthoot, Executive Director, Muthoot Fincorp