Muthoot Fincorp to dilute 5-6% stake to PE investors

Muthoot Fincorp Ltd, is looking to dilute five-six per cent stake to private equity (PE) players or strategic investors.

The non-deposit taking non-banking finance company (NBFC) expects to raise Rs 500-600 crore by divesting this stake, a top official of Muthoot Fincorp told Business Standard.

Muthoot Fincorp is a 100 per cent subsidiary of  Kerala-based Rs 20,000 crore, Muthoot Pappachan Group, which has interests in financial services-primarily gold loans —hospitality, IT infrastructure, property, automotive and renewable energy.

“A lot of private equity players and strategic investors are showing interest in picking up stake in our company. The money will be utilised to fund our expansion plans over the next one year. We are looking for a pan-India presence and accordingly will be adding 1,000 more branches by March 2012,” chairman and managing director, Thomas John Muthoot said.

The gold loan provider would start the discussion with the interested parties over the next couple of weeks and is expected to rope in a merchant banker on the same soon, he added.

“We have been growing our business at a very healthy rate with an average operating margin of four-five per cent. With India growing at six-seven per cent and considering the customer profile we are focussing on, the current economic slowdown will not have any impact on our business,” he said while commenting on whether it is the right time for the company to expand.

With a an asset under management close to Rs 6,500 crore, Muthoot Fincorp has around 1700 branches and its products offerings include gold loans, home loans, auto loans, loans against property, investment products and advisory services. The company also plans come out with an initial public offering in the next 18-24 months. "We have not decided yet, on the extent of the dilution, but once the market improves, we will be looking for an IPO,” Muthoot said.