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Muthoot Fincorp, the flagship company of the Muthoot Pappachan Group, has announced the launch of its first public issue of secured, redeemable non-convertible debentures (NCD) from Thursday (July 3).
This marks its entry into the debt capital market. The NCDs would have a facevalue of ₹1,000 each aggregating up to ₹100 crore, with the option to retain oversubscription up to ₹100 crore.
Interest rate
The NCDs will be made available through the 3,831 Muthoot Fincorp branches across the country and at BSE. The issue has been rated ‘CRISIL A’ by Crisil. SMC Capitals is the lead manager to the issue.
The NCDs offer investors an opportunity to lock in at an interest rate of between 10.75 and 12 per cent depending on the monthly, annual and cumulative options.
The issue offers 10 investment options and effective yield of up to 12 per cent and closes August 4. While the facevalue of each NCD is ₹1,000, the minimum investment amount for all options is ₹10,000.
The NCDs are issued in both physical and demat formats (except for cumulative interest option), with TDS not applicable on demat formats.
The funds raised through this issue will be utilised by the company to build its loan portfolio.
Gold loan player
Registered with the Reserve Bank, Muthoot Fincorp is one among the largest gold loan players. It claims an average of 50,000 walk-in customers daily
The net worth as on March 31, 2014, was ₹1,249.85 crore and the capital adequacy ratio, 21.01 per cent.
Thomas John Muthoot, Chairman and Managing Director, Muthoot Fincorp, told BusinessLine that the raising of the loan-to-value (LTV) ratio of 75 per cent (from 60 per cent) has helped improve its core business.
The first quarter of 2014-15 saw business grow at 20-22 per cent, though it paled against the robust 100-150 per cent growth during its heyday not too far ago.
Thomas John Muthoot expects the growth to sustain in the coming quarters. Answering a specific question, he said Muthoot Fincorp has around 35 tonnes of gold in its lockers as loan assets.
He expected interest rates to come down over the next few quarters given the new Government’s focus on the economy.
Diversification plan
“Our NCD with returns of up to 12 per cent offers an attractive investment proposition for our retail investor base,” he said.
The company is working to deal with the disadvantage of being known as a non-diversified player and now offers a mix of retail offerings such as loan products, money transfer, foreign exchange, insurance and wealth management services.
It has also launched a housing finance subsidiary Muthoot Housing Finance Company that caters to customers in the middle- and lower-income category.
The 127-year-old parent Muthoot Pappachan Group has a presence in various domains such as financial services, automotive, property, hospitality, and alternative energy.
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