Muthoot Fincorp Limited NCD Company Profile:
Muthoot Fincorp Limited (“MFL”) is a non-deposit taking, systemically important NBFC registered with the RBI. MFL is one of the prominent gold loan players in the Indian market. From FY2016 to FY2022, Muthoot Fincorp has shown a significant increase in its Gold Loan Portfolio at a CAGR (“compound annual growth rate”) of around 15 %. The personal and business loans secured by gold jewellery and ornaments (“Gold loans”) offered by the company are structured to serve the business and personal purposes of individuals who do not have timely or ready access to formal credit or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. The Gold loan portfolio of the Company as of September 30, 2022 comprised approximately 33.23 lakhs loan accounts. As of September 30, 2022, the Company operated out of 3,629 branches located across 25 states, including union territory of Andaman and Nicobar Islands and the national capital territory of Delhi and employed 16,264 employees including 148 contracted experts in its operations.
Muthoot Fincorp Limited is coming out with a debt offering of Secured Redeemable Non-Convertible Debentures with the face value of Rs. 1000 each, a Base Issue size of ₹ 200 Crore, and an option to retain oversubscription up to ₹ 200 Crore aggregating up to ₹ 400 crores, being the Issue size. The issue opens for subscription on Monday, 2nd January 2023, and will close on or before Friday, 27th January 2023. The allotment is on a first come first serve basis with the minimum application to be made is of 10 NCDs. A minimum of 75% of the Net Proceeds raised through this Issue will be utilized For the purpose of Working Capital and the remaining 25% for general corporate purposes.
Muthoot Fincorp Limited NCD Details:
|Issue opens:||Monday, 2nd January 2023|
|Issue closes:||Friday, 27th January 2023|
|Allotment:||First Come First Serve Basis|
|Face Value:||Rs.1,000 per NCD|
|Issue Price:||Rs.1,000 per NCD|
|Nature of Instrument:||Secured Redeemable Non-Convertible Debentures|
|Minimum Application:||10 NCDs (Rs.10, 000) & in multiple of 1NCD|
|Listing:||Proposed on BSE|
|Credit Rating:||CRISIL AA-/Stable by Crisil Rating|
|Issue Size:||Base Issue size of ₹ 200 Crore with an option to retain oversubscription up to ₹ 200 Crore aggregating up to ₹ 400 crore
Being the Issue size.
Muthoot Fincorp Limited NCD Specific Terms of the Prospectus:
The terms of the NCDs offered under the Issue are as follows:
|Frequency of Interest Payment||Monthly||Monthly||Monthly||Monthly||Annual||Annual||Cumulative||Cumulative|
|Tenor||27 months||38 months||48 months||60 months||48 months||60 months||27 months||38 months|
|Coupon Rate (% p.a.):||8.10%||8.25%||8.40%||8.50%||8.70%||8.80%||NA||NA|
|Effective Yield (% p.a.):||8.40%||8.56%||8.72%||8.83%||8.69%||8.79%||8.41%||8.57%|
|Amount (₹ / NCD) on Maturity:||₹ 1,000/-||₹ 1,000/-||₹ 1,000/-||₹ 1,000/-||₹ 1,000/-||₹ 1,000/-||₹1,199/-||₹ 1,297/-|
Muthoot Fincorp Limited NCD Credit strengths:
Muthoot Fincorp Limited is the third largest gold loan NBFC (“non-banking financial company”). The promoters have spent over 7 decades in the business of lending against gold jewellery. Over the years, the group has established a strong brand and reputation in South India and has an appropriate assessment and underwriting methodology.
The proportion of SME loans has reduced further to around 3% of the overall group’s AUM as on September 30, 2022, from 8% as on March 31, 2018. As of September 30, 2022, gross NPA stood at 3.5%. Additionally, Muthoot Fincorp Limited is doing regular auctions of gold loans which would help in reducing GNPA around 1% in gold loans. In the gold loan segment, the company has maintained healthy asset quality over the years, backed by strong collection efficiency, as reflected in GNPAs of 1.0-2.0% over the last five fiscals
RoMA improved to 1.4% (annualised) in Q1 2023 as compared to 1.2% in fiscal 2020. Muthoot Fincorp Limited’s profitability is expected to support the consolidated profitability. Additionally, with the expected improvement in the earning profile of subsidiaries and MCSL, overall profitability is expected to improve in fiscal 2023
Muthoot Fincorp Limited NCD Credit challenges:
MFL’s ability to access capital also depends on its credit ratings. Any downgrade of the credit ratings would increase borrowing costs and constrain the access to capital and lending markets and, as a result, would negatively affect the net interest margin and the business
MFL may not be able to recover the full loan amount, and the value of the collateral may not be sufficient to cover the outstanding amounts due under defaulted loans. Failure to recover the value of the collateral could expose the company to a potential loss, thereby adversely affect the financial condition and results of operations.