In 1979, the business was split among the founder’s three surviving sons, a process which was completed in 10 minutes. The eldest son, M. George Muthoot, moved out of Kerala and set up Muthoot Finance which has nearly 4,000 branches in the country today; the Pappachan group has 3,600 branches. “While Muthoot Finance may have more branches than us, we have many more products in our portfolio,” says Thomas John Muthoot.

Muthoot Finance, also known as The Muthoot Group, is principal team partner for the Indian Premier League team Chennai Super Kings and has actor Amitabh Bachchan as brand ambassador. After branching out from Kerala, M. George Muthoot used a red logo of two elephants standing trunk-to-trunk, with that branch of the family and its business being known as Red Muthoot.

Meanwhile, Ninan Mathai Muthoot’s youngest son Mathew M. Thomas or Muthoot Pappachan—the current chairman’s father who was then running the gold loans operations from Thiruvananthapuram—launched Muthoot Pappachan Group, with its blue branding.

“The blue colour is used to differentiate our group from the rest because all groups carry the Muthoot family name,” explains Thomas John Muthoot, who is also the chairman and MD of Muthoot Fincorp. “We have had no conflicts in the past 40 years.

and are unlikely to have any in the future despite being in similar businesses. All the groups are settled and we—the cousins—often meet informally to set interest rates for our products,” the Pappachan group chairman says.

The Pappachan group is helmed by the chairman and his two brothers: Thomas George Muthoot, who is the managing director of Muthoot Capital Services, and Thomas Muthoot, the other promoter-director of the group. The next generation is also firmly entrenched in the business: Suzannah Muthoot, the eldest daughter of Thomas Muthoot, is the zonal strategic consultant (west) of Muthoot Fincorp; Tina Suzanne George, the eldest daughter of Thomas George Muthoot, is associate vice president, finance, Muthoot Capital Services; and the chairman’s son Thomas Muthoot John is the head of the innovation lab at Muthoot Pappachan Group, and director, Muthoot Microfin.

Besides navigating the choppy waters of the sector, last year the brand transformed its motto from “Believe in Blue” to “Blue is Belief”. This was not just an indication of its coming of age, but also a growing confidence in its ability to meet its vision and mission statement. It promised to “fulfil the life-cycle needs of people at the bottom of the pyramid and help them realise their dreams and empower their hopes by being the most trusted financial provider at the doorstep”.

The group is now seeking to introduce new products. One such initiative is to bring more MSMEs into its financing fold, especially those denied loans by banks because of a low credit score or other reasons. “Whenever there is a choice between better facilities and margins in terms of designing our products and services, better facilities always win,” says Sanjeev Shukla, the group’s chief marketing officer.

Again, the growing importance of technology and customer data is not lost on the group, which has invested heavily in developing an “assisted model” to help customers learn mobile banking. “Instead of customers [doing that], we pull out all the data for them like bank details and CIBIL score and help in their financial literacy,” says Thomas John Muthoot. The group set up Muthoot Pappachan Technologies to take care of the back-end needs of all the group companies and ensure seamless connectivity among all branches. He explains the group has data on one million customers—essentially anyone who has ever used their services and products—and not just active customers. Sayeed says this data can not only be used to up-sell and cross-sell products among the same set of customers, but also to develop new products and services for their future needs. A case in point is the recently launched financing of used cars for those who aspire to move up from two-wheelers.

Haria of Antique Stock Broking believes that the company should use the current opportunity—the lack of competition—to raise equity capital of around ₹1,500 crore to ensure a sustainable 25% overall growth. “They should sell a part of their equity in the gold loans or microfinance business because raising finances through the initial public offering route at this time is not really advisable,” he adds.

Then there are other challenges of geographical concentration and asset classes. Sitaraman of CRISIL explains that since 80% of the group’s AUM is concentrated in the southern states—47% in Tamil Nadu and Kerala alone—Muthoot Fincorp is “exposed to the economic, social, and political situation in that particular region’.’

While the company has managed to grow its non-gold businesses—44% of the overall portfolio—in the past two or three years, challenges linked to asset quality remain, especially in the two-wheeler segment which is considered to be a relatively riskier one within the vehicle finance asset classes.

For Thomas John Muthoot, the most important thing in business is to be a humble person, responsible lender, and provide the right kind of advice—akin to what his personal trainer does for him. The Pappachan group chief is a fitness enthusiast. He trains for an hour and walks 6 km daily.

“Even if a person comes to us with ₹1 lakh, we sell him only 4 grams of gold jewellery [worth ₹17,052 as of October 16] because we know his family background, annual income, and understand that he wants to speculate on gold,” he explains.

“But raising my customer’s income, ensuring his economic well-being in times of stress and also helping the MSME and microfinance customers develop a sustainable business model is a real challenge and big responsibility for us,” he explains. “And I am trying to fulfil that responsibility.”

This story was originally published in the November 2019 edition of the magazine.

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