Kochi-based non-banking financial company Muthoot Finance holds 65.5 tonnes of gold jewellery as security for its loans.
“We are the pioneers in gold financing,” Muthoot group managing director George Alexander Muthoot told Business Standard, adding that, on an average, 53,000 people avail themselves of loan from the company everyday across India.
He said the total quantity of gold available in India was estimated to be 18,000 tonne.
As of March 31, 2010, the company’s gold loan portfolio consisted of 2.8 million accounts serviced through 1,605 branches spread across 20 states. Its average cost of funds was 11 per cent and the average return on loans was 19.94 per cent.
The family-owned company, which started the gold finance business in 1939, posted a net profit of Rs 227.57 crore in 2009-10. Last year, gold loans under its management stood at Rs 7,341.73 crore, a 122 per cent rise over the previous year's loan portfolio of Rs 3,300 crore.
Expansion of the company's network and raising awareness in the public on gold loans were stated to have contributed to the steep rise in the loan portfolio.
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According to Muthoot, the company’s customers are typically small businessmen, vendors, traders, farmers and salaried individuals who for reasons of convenience, accessibility or necessity avail of credit facilities by pledging their gold jewellery.
He said the company was hopeful of coming out with an initial public offering (IPO) by January, next year. It had recently submitted the draft red herring prospectus (DRHP) pertaining to the proposed IPO to the Securities and Exchange Board of India (Sebi).
The objective of the IPO was to augment \the capital base to meet its future capital requirement and for general corporate purposes including strategic initiatives and brand building exercises.
“We are expecting that the Sebi will approve our DRHP by December and we will be able to complete the IPO by January,” Muthoot said.
He said the company had already divested 6.5 per cent stake through preferential allotment of shares to four private equity (PE) investors for Rs 255 crore in the last three months. The last of the four PE investors had paid Rs 55 crore for a 1 per cent stake. The company would be divesting an additional 13.8 per cent stake through the proposed IPO.
Besides gold loans, the group offers money transfer services and is also involved in the business of hotels and hospitals. It also operates a radio station, Chennai Live, and three windmills in Tamil Nadu.