Gold loan company, Muthoot Finance, has raised Rs 157 crore by issuing shares to the extent of 4% of the firm’s capital to private equity firms Baring Equity Partners India and Matrix partners India.
Both the private equity firms now have a 2% stake each in the company, which is valued at $1 billion in terms of the present deal, said KP Padmakumar, executive director of Muthoot Finance.
The capital has been raised for meeting capital adequacy and business growth. Following the infusion of fresh capital, the company’s capital adequacy ratio has improved to 17%. Muthoot’s assets grew by Rs 2,000 crore from Rs 8,000 crore in the first quarter and is expected to touch the Rs 15,000-crore mark by FY11. The NBFC eventually plans to go public.
The Kerala-based NBFC at present has around 1,800 branches across the country spread over 22 states, with a footfall of 50,000 people each day and a customer base of over 35 lakh.
Mr Padmakumar said the company opposed the State Money Lenders Act, as it makes the company answerable to two regulatory authorities. “In Kerala and Tamil Nadu, we have no issue. In other states, wherever there is a conflict of interest, RBI intervenes and says an entity like an NBFC cannot be controlled by two regulatory authorities. There is no aversion to getting controlled under the Money Lenders Act. The question is if the Act was to operate on us, it becomes difficult to satisfy two regulatory authorities.”
This is the first time that the NBFC has diluted its stake. Going forward, the firm is looking at infusing more private equity capital.
Muthoot Finance managing director George Alexandar Muthoot said: “Our average loan size is worth `22,000. Last year, we recorded compounded annual growth rate of 100%. This year, we may grow by the same percentage.”
About the recent corrections in gold prices, he said, “Gold prices may go up now and maybe in around 2-3 months, it might come down by around 4-5% and then again rise by around 10%. However, we are not impacted much by it, because we take only gold ornaments. On gold ornaments, there is an invisible margins — we always keep 20-25% margin for the loan and then there is a margin for making charges of 15%.”
The NBFC learnt revenues of Rs 1,089 crore with a profit after tax of Rs 227.6 crore in FY10. Its non-performing assets stood at 0.46%.
Source: Economic Times