Muthoot Finance to raise Rs 600-cr via debentures

The country's largest gold financier Muthoot Finance today announced plans to raise up to Rs 600 crore debt from public through a debenture issue, which will open for subscription on Thursday.

"We are hitting the market second time this fiscal with a public issue of secured, redeemable, non-convertible debentures [NCDs] aggregating to Rs 300 crore with an option to retain over-subscription of similar amount, totalling up to Rs 600 crore," Managing director of the 72-year-old Kochi-based firm, George Alexander Muthoot, told reporters here.

In August, Muthoot, which has around 20% market share in the gold loan market, had mobilised Rs 693 crore from an NCD issue.

About the net interest margin in a scenario of high interest rates and intense competition, chief financial officer Oommen K Mammen said that there was no pressure on NIM which stood at 10.5%.

When pointed to the risks to the business in a market where gold prices are falling (from over Rs 29,000 for 10 grams recently to Rs 27,395 in Mumbai today) Mammen said, his company's LTV (loan-to-value) has come down to 61% now from 72% last year.

To hedge risks, the average value that Muthoot offers to a consumer is only around Rs 1,700 per gram, said Mammen.

The current issue, closing on January 7 and will be listed on the Bombay Stock Exchange (BSE), offers up to 13.43% yield for a maturity of 66 months. The company had offered 12.25% return for the debenture issue in August.

The face value of each NCD is Rs 1,000 and the minimum application is for five NCDs and in multiples of one NCD thereafter. The issue has the highest rating by Crisil and Icra.

The funds raised through this issue will be utilised for various financing activities, including lending and investments, repaying some existing liabilities or loans and for business operations including capital expenditure and working capital requirements, Muthoot said.

As of Q2, Muthoot had 3,274 branches in 20 states and a customer base of 5.5 million.

Muthoot had an interest income of Rs 202 crore on a loan book of Rs 2,094 crore as of H1 this fiscal, which stood at Rs 230 crore last fiscal on a loan book of Rs 1,587 crore. Net NPA rose to 0.59% in H1, over 0.29% in FY11.

The lead-managers to the issue are ICICI Securities, HDFC Bank, AK Capital Services, and Karvy Investor Services with SMC Capitals and RR Investors Capital Services being the co-lead managers.