Muthoot Finance picks up 30% stake in Lankan NBFC for $ 2.1 million

The south-India based company will help the Lankan firm operationalise loan against gold ornaments business in the island nation

Facing growth headwinds following regulatory tightening, leading pure-play gold financier Muthoot Finance today announced branching out to neighbouring Sri Lanka by acquiring a 30% stake in Asia Asset Finance for $2.1 million.

The south-India based company acquired 1,67,785,600 shares in the Sri Lankan financial service firm, which is listed on the Colombo Stock Exchange, from Asia Capital, a major shareholder in the company.

Through the investment, Muthoot will help the Lankan firm operationalise loan against gold ornaments business in the island nation, the Kochi-based Muthoot said in a statement.

Asia Asset Finance, which has been in the lending business since the 1970s, is involved in retail finance and business loans, and operates from 11 branches in the island nation.

Muthoot also expects the company to improve its lending operations and profitability going forward, which will result in an improvement in the value, it said.

It can be noted that the Reserve Bank has repeatedly sounded caution about the lending against gold business due to concentration risk, and imposed several restrictions which impacted the growth of the companies in the sector. A majority of those have been rolled back gradually.