From humble beginnings to founding a million dollar Group: The Story of George John Valath

Gold, a symbol of wealth and prosperity in India, is considered as an asset due to its ever growing value. During economic uncertainty and financial emergencies, individuals pledge gold as collateral at banks or NBFC’s (non-bank financial company) offering credit at competitive interest rate. South India is the largest market for gold loans. The market size of gold loan in India is estimated to be around $80.12 billion. It is likely to grow at a CAGR (compound annual growth rate) of 6.80 per cent, over the next four to five years. Competing with nationalized and private banks are NBFC’s, luring borrowers with easy and quick access to gold loans, lower interest rate, no requirement of credit score and high loan to value ratio. Betting big on Telangana’s gold loan market is Kerala-based RichMax Finvest, the NBFC arm of RichMax Group. During his visit to the city, George John Valath, Chairman, RichMax Group revealed to Bizz Buzz, his plan of shifting base and expanding presence in Hyderabad

How did your entrepreneurial journey start?

During my education phase at Allahabad, I used to travel into villages of Lucknow, Banaras, Kanpur, and Greater Noida. After living briefly in these villages, my vision to provide jobs to others grew stronger. I never wanted to be an employee. From childhood itself I had never borrowed money from my family members. While in high school I started working and earning for my schooling, and college life. I used to deliver newspaper in the morning and work as a salesman at a shoe store in the evening. I started to invest on gold while studying in 10th standard. The first gold I bought was a small finger ring for my sister, as a gift. As it was all hard-earned money I did not want to spend it, this taught me the initial lesson of investing in post office, and later in banks. After post-graduation, I wanted to work in a service sector, and so I chose the banking sector. There too, I was interested in creating and providing jobs in villages. For few years I was associated with ICICI bank. Later I shifted to a NBFC, I would prefer not to reveal the name of the company. For 12 years I worked in the gold loan segment. This NBFC was my school that taught me the nuances of finance and business.

After gaining experience, I started a Nidhi company with seven others. My vision and mission is long-term based. Here, I felt that decision making was difficult as others were involved. During my MBA classes, I had learnt that employees get distracted and confused when there are two heads making the call. If we compare such companies with that of family businesses such as Manappuram or Muthoot, they have grown and expanded smoothly while others are unable to grow as they get spread out. Nearly four years later I walked out of that company, it is very much present with 35 branches spread across Kerala. Synchronizing my exit from that company with that of fulfilling my vision, was the beginning of pandemic in 2020. I founded RichMax Group with my mother, under which a not-for-profit RichMax Foundation took off to help the people in need. This was followed by the launch Valath Jewellers, Nidhi Ltd and a Marketing and Consultancy firm. The NBFC under which we provide gold loan, RichMax Finvest is operational from 2022. It took us 18 months to get the approval of RBI, after acquiring another Delhi-based NBFC, as RBI does not issue a fresh license. The latest venture is RichMax Tours and Travels. I wish to inform that, at present it is only me and my mother on the Board. As there should be a Board of members along with a Chairman, I am gradually adding members like a retired judge, who will benefit mutually.

What are the offerings provided under Finvest?

We offer gold loans, micro finance, wealth management and Jewel Jyoti for Valath jewellery owners. In addition to Telangana, RichMax Finvest has 91 branches spread across Kerala, Orissa, and Tamil Nadu. Currently in Telangana we are offering gold loan, HDFC Life Insurance and another health insurance. These two products help us earn extra as by only providing gold loan will not help our business. We will study the market here, and gradually introduce our other products.

What are your plans to mark presence in Telangana’s gold loan market?

I have plans to shift RichMax corporate office from Kerala to Hyderabad. The rent or lease of properties in Hyderabad is affordable when compared to Kerala. In many ways this city is better, revenue wise too I foresee that Hyderabad can provide an opportunity to grow. People here are friendly and open to welcome other language speaking businesses. Everyone is coming to Hyderabad as it is affordable. For business too this city fares better than others. At present, we have 10 branches in Telangana spread across Hyderabad, Warangal, Suryapet and other districts. Over the next 18 months we will be opening another 100 branches in the city. With the expansion in place, we will be strengthening our team from the current 50 employees to 2,000. Over the next five years we will have 400 branches across Telangana and 1,000 across India, besides a micro financing bank, for which we are in the process of acquiring another NBFC.

What is your target for disbursing gold loans over the next two financial years?

From the 91 branches, RichMax Finvest has earned an AUM (asset under management) of Rs 350 crore. We have disbursed gold loans worth Rs 1.5 crore in the 30 working days of the branches being operational in Telangana. In a financial year, as per RBI rule, we are permitted to raise non-convertible debentures (NCD) of 200 ticket-size, besides sub-ordinate bonds. Hence, we will be raising Rs 150 crore in this fiscal year. After adding our current AUM of Rs 350 crore to the NCD of Rs 150 crore, we will have Rs 500 crore at our disbursal, of which 90 per cent will be provided as gold loans and the rest will be utilised for our expansion plan. For Telangana’s gold loan borrowers, we have earmarked Rs 150 crore.

What was the strategy, tech or manpower that went behind achieving Finvest’s growth in a short period?

I do not believe in employing MBA graduates. Our young and enthusiastic team has helped Finvest grow rapidly. We have a vigilance department which looks into the background of each employee we hire. We also have a daily monitoring system in place. Moreover, during the opening of a new Finvest branch, we start operations with a donation of a certain amount to a person in need or to a patient. This is a belief that I have followed during the opening of all the 91 branches.

Who are your major borrowers and for which requirement do they approach Finvest?

Demand for gold loan is high in rural areas. It is either for small businesses or agriculture. They are honest in paying back the interest as they want to recover their gold that was pledged. In cities gold loans are sought for buying property, business, or their child’s education fee. The interest rate varies depending on the scheme that the loan seeker has opted for, it usually starts from 14 per cent.

How do you deal with borrowers who default on paying interest on gold loan or micro finance?

NPAs are seen in micro finance in Kerala and other States too. In gold loans, if there is a proper mechanism in place for collection of interest payments then there should be no defaults. If there are regular follow ups, NPA’s should not take place anywhere. By regular follow up and mechanism I mean that proper auditing is needed that is usually missed out at some of the co-operative societies. While loan defaults are high at these co-operative societies, in big names such as Muthoot or others the profit margins are huge. We have slightly booked profits. If the team is strong, the founders have a strong will power and a fool-proof mechanism is applied, then micro finance providers are capable of turning into small banks. The government and RBI should get strict with the rules and checks, and be more pro-active too.

What was the intent behind establishing tours and travel, marketing consultancy under the group?

The six companies under RichMax Group are all related businesses. We have 400 employees in Kerala. If these employees refer a customer for any of the vertical, they stand a chance to earn incentive. It is the same with tours and travels, jewellery, wealth management, loan or marketing. All of these are revenue generating businesses for us and for our employees from business referrals. Only through gold loan an employee cannot earn much, but if they want to sell gold jewellery or in the side want to sell a ticket under tour and travel, or insurance, they will earn incentives. When our staff earns added incentive the lifestyle of these employees gets better. We are shortly opening second Valath jewellery store in Kerala. We have local support in Kerala, so how much ever crowded the jewellery marker is in Kerala we will still get sales automatically. We are not entering any new State but will be expanding in the States we are present. Andhra Pradesh, West Bengal is a good market for Finvest, Delhi is a familiar market for me to enter, and so is Uttar Pradesh, but we will first stand stable in the current markets and then move slowly into new demographics.