Muthoot Finance's Rs 500-cr bond issue opens tomorrow

Mumbai: Gold loan company Muthoot Finance’s Rs 500-crore bond issue, the third this fiscal, will hit the market on Friday.

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

“We have got Sebi permission for a Rs 250 crore NCD (non-convertible debenture) issue which has a green-shoe option,” Muthoot Finance Managing Director George Alexander Muthoot said here.

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The issue offers four different tenors - two years with a yield on 13 percent, three years at 13.25 percent, five years for HNIs and QIBs, with a coupon of 13.25 percent and five and a half year tenor attracting 13.43 percent.

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In the past two issues, the largest gold loan firm in terms of loan portfolio had offered 13 percent for two years and 13.25 percent for three to five year bonds.

On higher pricing, Chief Financial Officer Oommen K Mammen said going by the indications from RBI, the interest rate has reached its peak and “we want maximum participation from the retail investors and hence the higher coupon”.

The issue, priced at Rs 1,000 per bond with a minimum of Rs 5,000 worth of bonds, opens on March 2 and closes on March 17.

Muthoot said the funds will be used for operational expenses, apart from part-paying debt. This is the third NCD issue from the company this fiscal.

Earlier, it had raised Rs 693 crore last August and Rs 459 crore in December.

The company has so far raised Rs 10,000 crore worth working capital from as many as 30 banks and mutual funds. Since the bank lending to gold financing firm has been tightened by the Reserve Bank recently, Muthoot said his cost of fund has gone up to some extent.

In the recent past, the cost of funds has gone by 2.5-3 per cent to 12.5-13 percent, while the firm’s net interest margin remained at 10.81 per cent at the end of Q3, he said. However, Muthoot said in the fourth quarter he sees marginal fall in this (NIM) to 9.5 percent, as he doesn’t see the interest rates dropping before the new fiscal.

On the rationale for the third NCD route, Muthoot said most of the banks have now reached their sectoral cap to the industry, forcing people like us to look for more diversified fund raising avenues. As of the quarter to December, the highly leveraged company had an asset size of around Rs 23,000 crore out of its share capital of just about Rs 3,000 crore, with the debt being the rest, Muthoot said.

On expansion plan, he said the Kerala-based gold loan player is likely to overshoot the branch plan by almost 100 to 800, taking the overall network to 3,480 by this fiscal-end. During the December quarter, its retail loan assets rose by Rs 1,944 crore to Rs 22,885 crore, while income grew 91 per cent to Rs 1,231 crore, helping the company report a whopping 61 percent spike in net profit at Rs 251 crore as against Rs 155 crore a year ago.

PTI