Gold loan company Muthoot Finance Ltd, which is issuing 5.15 crore shares in an ongoing IPO, has said that the proceeds would used to maintain its capital adequacy ratio (CAR) above 15 per cent and would also be utilised to expand its lending further. The IPO opened on April 18 and would close on April 20.
Oomen K Mammen, CFO, Muthoot Finance Ltd, said the company’s CAR as in November stood at 15.06 per cent and net worth stood at Rs 1,100 crore. With the proposed fund-raising the net worth will increase by another Rs 900 crore, he said.
It may be noted that the Reserve Bank of India recently increased the capital adequacy ratio of NBFCs to 15 per cent and removed the priority sector status of gold-loan companies.
“We are looking at raising Rs 824 crore to Rs 900 crore. Post-issue, the promoter group's stake will come down to 80 per cent from the current 93 per cent,” he said.
Last year, the company has raised Rs 256 crore from the private equity players including Baring India Private Equity Fund, Matrix India, Kotak India Private Equity and Wellcome Trust.
Responding to a query on whether the company would look at raising another round from PE players, Mammen said, “It will be depend on how fast we are growing and have several options including QIB and raising from PE funds”.
The 124-year-old Muthoot Finance, the flagship company of the Kochi-based Muthoot George group, gold loan book rose to Rs 13,000 crore as in November compared to Rs 7,400 crore in fiscal 2010. The company has around 4.1 million loan accounts. Muthoot Finance, which lends against gold jewellery, is the largest gold financing company in the country with a 20 per cent market share. The proceeds would be utilised to expand our lending further, he said. It has around 4.1 million loan accounts. Muthoot Finance is into the business of lending against gold jewellery. It is the largest gold financing company in the country with a 20 per cent market share.
The gold loan market is dominated by un-organised players including private lenders, pawn-brokers lending against this collateral at high rates. According to industry estimate Indian households are estimated to have a gold holding of anywhere between 15,000 and 18,000 tonne, of which Muthoot Finance alone has a holding of 100 tonne of gold as security.
Theoretically, this translates into a Rs 30 lakh crore lending business opportunity (assuming a 75 per cent loan-to-value). According to ICRA IMacs industry report, the organised market size was only Rs 37,640 crore in March 2010.