Muthoot Finance may raise Rs 1,000 cr through second NCD issue

Muthoot Finance, the largest gold-loan non-banking finance company is planning to raise another Rs 1,000 crore through listed retail non-convertible debentures (NCD), if its first such exercise closes successfully.

George Alexander Muthoot, managing director, Muthoot Group said: “According to the response that we get from this issue we will take a decision in the next ten days on raising another Rs 1,000 crore.”

In last two weeks, four NBFC’s, including Mannapuram Finance, Shriram City Union Finance Ltd, which provide loan against gold, have launched listed retail NCD’s that were successfully mopped up by investors.

The NCDs will be listed on the NSE and the BSE and will be used for debt repayments and increasing its market base in the north, east and west zones. The NCD issue has three investment options and yield of up to 12.25 per cent per annum. “In the first quarter itself we have added 250 branches and we will be adding another 650 branches by the end of the year. It includes 15 branches in Kolkata this month.”

Muthoot finance has seen a growth of 15 per cent in loan disbursement in Q1FY12, with an increase of Rs 2,080 crore. For next year, the company is expecting a loan book growth of another Rs 8,000 crore.

The company’s average lending rate is 21.6 per cent with a net interest margin of 9.5-9.6 per cent. Its non-performing asset ratio is 0.3 per cent. Its average loan is of Rs 34,000 in urban areas and Rs 5,000-10,000 for rural and semi rural areas. The average time period in which a loan is paid back is four months and every loan holds a tenure of 12 months.

The outstanding in the company’s loan book stands at Rs 18,000 crore, which includes bank loans of Rs 7,200 crore, retail unlisted NCD and private placements worth Rs 4,400 crore and commercial papers of Rs 1,171 crore. Its capital adequacy ratio is 21 per cent.

Muthoot needs to come out and offload another five per cent equity stake in the next two years. At present, the promoters hold 80 per cent stake in the company.

According to market regulator Securities and Exchange Board of India (Sebi), promoters of a listed company have to offload 25 per cent equity stake in the open market.

In April, this year Muthoot had raised Rs 900 crore by offloading 13 per cent stake through its initial public offering (IPO). It also offered private-equity pre-IPO placement with the world’s largest sovereign wealth funds Abu Dhabi Investment Authority, Matrix Partners, Kotak Private Equity and Baring India Private Equity by offloading seven per cent.