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Muthoot Capital Services plans to raise ₹200-250 crore capital during the current financial year.
“We plan to raise about ₹200-250 crore in this fiscal year. We have not decided on anything but we may look at other cheaper sources of funding…We are in talks now,” said R Manomohanan, Chief Executive Officer of Muthoot Capital Services.
The Kochi-based non-banking financial company recently received sanction to raise ₹125 crore. It may look at raising funds by issuing non-convertible debentures (NCDs) or commercial papers (CPs).
“So far we have been depending on bank finance and that is the main source of funding. But we are planning to diversify to other sources such as CPs or even NCDs. We need money but the time has come that we should look at reducing our cost of funding. Also, our size of funds have increased from ₹50 crore five years back to over ₹800 crore now. So, even a 1 per cent reduction in interest rates could be big,” Manomohanan said.
Muthoot Fincorp, the flagship company of the Muthoot Pappachan Group, is looking at private equity (PE) funding of ₹600-800 crore this fiscal.
After a period of slackened growth in FY15, Manomohanan expects the coming year to be better as the economy and demand get back on track.
Manomohanan said, “Last year we saw some increase in NPAs (non-performing assets), though they are less than 4 per cent. We are growing and the portfolio has matured, so defaults are bound to be there at this stage…We are looking at putting the collection mechanism and legal action in place to recover the defaults as we expand. We are confident that the percentage of NPAs can be brought down this year.”
About 4,000 cases amounting to less than ₹10 crore have been referred for arbitration, which is a much simpler and cheaper way to recover money. And that could add to the profits, he pointed out.
At present, Muthoot Capital finances the two-wheeler segment and plans to get into three-wheeler financing in three to four years. The company plans to grow its asset base to over ₹1,000 crore in a year’s time from ₹741 crore as on December 2014.
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