Muthoot Capital Services plans Rs1,200cr bank borrowing

KOCHI: Muthoot Capital Services Ltd (MCSL), part of the Muthoot Pappachan Group. plans to borrow Rs1,200 crore from banks through term loans, reveals a document released by a leading credit rating agency.

Though the timeframe and the name of the banks have not been specified, the proposed term loan has been already assigned an A+ rating by the rating agency.

The total bank borrowings of MCSL as of June end, 2024 stood at Rs1,751crore, according to their investor presentation.

The company has decided to raise Rs20 crore through the issue of commercial paper (CP) at a discount rate of 9.99 per cent, according to a stock market filing by the company on Monday (Sept 20).

NCDs and CPs

Moreover, MSCL has also raised Rs51 crore through the assignment of loan receivables aggregating to Rs54.31 crore recently, whereas the company’s board has also approved a plan to allot NCDs worth up to Rs50 crore through private placement.

Tough times behind now

After facing several challenges during the Covid-19 pandemic, MSCL underwent a few vital changes and cleaned up its non-performing portfolio.

The company reportedly sold its stressed assets portfolio worth Rs235 crore, which was affected due to the pandemic, to an Asset Reconstruction Company (ARC) and this has resulted in the contraction of assets by around 4 per cent to Rs2018 crore as of March 31, 2023 according to the company document.

In just over a year, the company reclaimed its growth in assets under management (AUM), and by the end of June 2024, the AUM stood at Rs2,182 crore.

The asset sale to ARC has substantially improved the quality of company’s assets, with gross non-performing assets (GNPAs) falling to 10.2 per cent in FY24 from 20.6 per cent in fiscal 2023 and then to 9.84 per cent as of June end, 2024 (Q1 FY25).

Muthoot Pappachan Group

MCSL is an integral part of Muthoot Pappachan Group (MPG) and MCSL derives significant benefits from its linkages with the group.

The group has diversified its operations into vehicle financing through MCSL. The company has common promoters and promoter directors with the other MPG companies.

Incorporated in 1994, MCSL is a deposit-taking, systemically important non-banking financial company (NBFC).

Though the company started its operations in 1995, it commenced lending activities in 1998 after acquiring an NBFC licence.

Though it started off by providing gold loans, subsequently, as the group scaled up its gold financing business in MFL, MCSL entered the two-wheeler financing segment in fiscal 1998, and gradually exited the gold loan business.

As on March 31, 2024, the company’s asset under management (AUM) was Rs 2018 crore wherein around 88 per cent of the total portfolio was two-wheeler loans.