Muthoot Finance NCD Public Issue Tranche II September 2023 Review
About the Issue
Muthoot Finance Limited has launched its public issue of NCDs to mobilise funds from the debt market. Read further to know more about the business of Muthoot Finance Limited.
|Issuer||Muthoot Finance Limited|
|Type of Instrument||Listed, Secured, Redeemable, Non-Convertible Debentures|
|Issue Size (Shelf prospectus)||₹ 2,600 crores across various tranches|
|Issue Size (Tranche II)||₹ 100 crs + ₹ 600 crs (Green shoe option)|
|Face Value||₹ 1,000|
|Tenure||24 months to 60 months across Series I-VII|
|Yield||7.75% to 9.00% across Series I-VII (this depends on the category of investor)|
|Application size||Minimum 10 NCDs and in multiples of 1 NCD thereafter|
|Security Cover||Minimum 100% security cover of the principal outstanding plus interest thereon|
|Credit Rating||ICRA AA+/Stable|
|Issue Open Date||21-September-23|
|Issue Close Date||06-October-23|
Specified terms of the NCD’s are as follows:
About the Muthoot Finance Limited
Muthoot Finance Limited (“MFIN”) is the largest gold loan NBFC in India. MFIN is an “Upper Layer NBFC” (NBFC-UL) headquartered in the state of Kerala. It has been operating since 1939 when M George Muthoot (the father of current Promoters) founded the company. It provides loans secured by gold jewellery, ornament, etc for personal or business purposes to individuals who are not able to access credit or are in urgent need of money.
On a standalone basis, MFIN has a loan AUM of Rs. 67,639 crs as of June 2023 across 29 states and 4,700+ branches. It has an active customer base of 54.13 lakhs and 83.36 lakhs loan accounts as of June 2023. For the years ended March 31, 2021, 2022 and 2023 its revenues from gold loan business constituted 95.88%, 96.67%, and 95.10% respectively of the total income.
About the Group
In 1939, M. George Muthoot created a partnership firm under the name of Muthoot M. George & Brothers (MMG). MMG was a chit fund based out of Kozhencherry. In 1971, the firm was renamed as Muthoot Bankers, and started to finance loans using gold jewellery as collateral. In 2001, the company was renamed to Muthoot Finance. Muthoot Finance falls under the category of systematically important non-banking financial company (NBFC) of the RBI guidelines. As of June 2023, the promoters hold 73.35% of the equity stake in the company.
Over the years, MFIN has established its presence in the gold finance market as the largest institution in history. The total income of the company amounted to ₹ 11,975.01 crs for the year ended March 31, 2023, and ₹ 12,238.16 crs for the year ended March 31, 2022, on a consolidated basis. The company earned profit of ₹ 3,669.77 crs for the year ended March 31, 2023, and ₹ 4,031.32 crs for the year ended March 31, 2022, on a consolidated basis.
MFIN is the flagship company of the group. The corporate structure of MFIN is shown below:
The group companies are engaged in various financial activities as elaborated below:
|Name||Primary business||Date of Incorporation|
|Muthoot Finance Limited||Gold loans||14-Mar-1997|
|Muthoot Homefin (India) Limited||Affordable housing loan||26-Aug-2011|
|Muthoot Money Limited||Vehicle Finance||13-Dec-1994|
|Asia Asset Finance PLC||Listed diversified NBFC in Sri Lanka||23-Sep-1970|
|Muthoot Insurance Brokers Private Limited||Insurance broking||23-Jan-2002|
|Muthoot Asset Management Private Limited||14-Jan-2019|
|Muthoot Trustee Private Limited||28-Jan-2019|
Gold Loan Industry
Gold loans (also known as loans against gold) refer to short-term loans sanctioned by banks, non-banking financial companies (NBFCs) and other lenders against the pledge of gold ornaments and jewellery and are popular with farmers looking to meet agricultural expenses and individuals or households who need to meet planned or unplanned expenses. Indians regard gold as a vital symbol of social status, financial security, and intergenerational legacy, and such is the emotional and cultural attachment to gold that households prefer to use gold as collateral for financing for key life goals like healthcare, farming, small business, education, and weddings, rather than liquidate the metal outright for cash.
The gold loan is therefore a historically popular instrument, and the overall gold loan market consists of the organised sector (with regulated players such as banks, NBFCs, and Nidhi companies) as well the unorganised/informal finance sector (run by pawnbrokers and moneylenders). The World Gold Council (WGC) estimates that the overall gold loan market (organised and unorganised) in India has grown from ₹ 600 billion in FY2009-10 to ₹ 9,000 billion in FY2019-20, at a CAGR of 31.1%.
Financial Performance (at consolidated level)
|Debt to Equity||2.52||2.69||3.20|
*This has been calculated excluding the foreign subsidiary “Asia Asset Finance PLC”.
CRAR of NBFCs in the group (Standalone)
|Name of the NBFC||Minimum Regulatory CRAR||CRAR as of March 31, 2021||CRAR as of March 31, 2022||CRAR as of March 31, 2023|
|Muthoot Finance Limited||15%||27.40%||30.00%||31.80%|
|Muthoot Homefin (India) Limited||49.90%||60.34%||62.91%|
|Muthoot Money Limited||29.00%||46.00%||24.00%|
Top 10 NCD holders as on August 11, 2023:
Nature of Borrowings
|Nature of Borrowings||Q1 FY24||FY23||FY22||FY21|
Type of Borrowings
|Type of borrowing||Q1 FY24||FY23||FY22||FY21|
|Debt Securities (NCD’s)||12,728.83||13,738.37||12,497.89||13,796.06|
Peer Comparison* (FY 2023)
|Particulars||MFIN||Manappuram Finance||IIFL Finance|
|Revenue from operation||11,898||6,684||3,018|
|Debt to equity||2.52||2.95||3.50|
|Rating Agency||MFIN||Manappuram Finance||IIFL Finance|
|CARE||Not Rated||AA-/Stable||Not Rated|
|India Ratings||Not Rated||Not Rated||Not Rated|
Credit Rating history
- One of the largest gold finance companies with an established track record.
- More than 95% of the loan portfolio is secured by gold which is a highly liquid asset.
- Adequate capitalisation with CRAR of 31.77% as of March 2023.
- Comfortable group leverage at 2.52x as of March 2023.
- Most of the loan portfolio is concentrated in South India (48% as of March 2023).
- Moderation of growth in business in the recent past.