Reduction in operating expenses and better interest collection aided growth in the third quarter ended December 2015, says George Alexander Muthoot, MD of Muthoot Finance . The company reported a 21 percent increase in its net profit to Rs 187 crore and a 7 percent rise in total income to Rs 1,141 crore. Net interest margin rose 7.1 percent to Rs 576.7 crore in the quarter gone-by. Muthoot says slight growth was visible in asset under management (AUM) and he expects a 10 percent AUM growth for the full year and also for FY17. If the economy picks-up, then AUM number could be better than 10 percent also, he says. The company’s Sri Lanka business has done well in Q3, he says. The cost of borrowing has also reduced as the company had issued non-convertible debentures worth Rs 250 crore in the last quarter, Muthoot adds. Going forward, he expects profit growth to remain stable. Below is the verbatim transcript of George Alexander Muthoot’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: Can you just start by telling us whether this retail loan growth of around 13 percent the assets under management (AUM) growth is that something that you can continue to see in the quarters to come and what led to the performance this quarter around? A: This quarter around, what has led to the better performance is their better interest collections. Also, we have been able to save some of the operating expenses, so operating expenses savings and also the interest collection has helped us to get through a better quarter. The growth of the gold loan of 13 percent on year-on-year (Y-o-Y) probably in this next quarter also we may see a slight growth in the assets under management. Probably, we end the year with about 10 percent plus growth in the year end, the whole year. Latha: 10 percent in assets under management? A: Yes, our yield has been steady, it is at 18 percent. The cost of funds certainly has come down a tad by about 15-17 basis points, cost of funds has come down. However, we have been able to maintain a net interest margin (NIM) at 9 percent over the last one year. So, that has been a good thing for us that we have been able to maintain the NIM. In this year our subsidiary the Asia Asset Finance in Sri Lanka has also done exceedingly well. They have grown their books by about 36 percent and their asset base is also increased by 7 billion Sri Lankan rupees. They have introduced the gold loan scheme and also the micro finance portfolio in Sri Lanka which is showing good traction there. So, overall the Sri Lanka operation has been a good performer in the last quarter and of course in the last three quarters. Sonia: You said a 10 percent growth in AUMs in FY16. What about FY17? What are the early trends looking like and what could the growth be? A: We should see the same growth of 10 percent. If economic activities pick up probably it will better. Otherwise, steady state we should see 10 percent growth in AUMs. Latha: Bad loans have been steady, no problem with defaults? A: Default is not an issue for a gold finance company because we have the gold with us. The default is only, may be postponement of the interest collection. That is what we see as a why the profits sometime get affected because the gold loans get redeemed later on, not early. So, we give little more time to the customers to pay that is why you see sometimes the assets or the bad debts etc. During this quarter we also completed a 13th public issue of a debenture for Rs 250 crore plus another Rs 250 which was oversubscribed. That actually, you are able to bring down our cost of borrowings because of that. Each time we issue the non-convertible debentures (NCD) it comes at a lower and lower cost to the market. Sonia: You did mention that the operating expenses have gone down this time around, can you just quantify that for us? A: The operating expenses which were about Rs 10 crore has come down by about 10 crore this year, probably little bit of lesser advertisement cost as also lesser provisioning. Latha: You said now your AUM grew 13 percent by end of the year it will be 10 percent, what is it for FY17? Why is it that you are seeing a receding pace of AUM growth? A: That is because it is the last 12 months. What you see is the last year’s last quarter was also there. That was a very good quarter that is why you saw 13 percent from last quarter to this quarter. However, this quarter we may not see that same growth which you saw last year fourth quarter.