- Company is in talks with institutions on Rs150 cr-Rs200cr invesment
KOCHI: Kosamattam Finance Ltd, the smallest among the trio that controls the country’s gold loan market – Muthoot Finance and Manappuram Finance being the other two with much bigger presence – is planning to expand its paid-up capital by about Rs150 crore to Rs200 crore.
According to informed sources, Kosamattam management is in final rounds of talks with a couple of financial institutions that are keen to invest in the company.
Financial experts in the industry confided to businessbenchmark.news that Kosamattam now needs to increase its capital base as a prerequisite to grow, as its current rating of BBB from India Rating and Research Pvt Ltd may not be strong enough to attract funding from banks that is considered lifeline for NBFCs.
However, the top management members refused to comment when approached for a response. More importantly, the non-banking finance company (NBFC) that is mostly dependent on gold loans for its business will have to boost its capital adequacy ratio (CAR) from the present levels in order to expand business volumes meaningfully in the future.
Kosamattam’s CAR as of March 31, 2018 was 17.12 per cent against 16.68 a year ago, though the minimum required is 15 per cent. The company with a networth of Rs335.23 crore compared with Rs274.41 crore last year, had assets under management (AUM) to the tune of Rs2455.88 crore as of March 31, 2018.
The company has been on a growth path for the past few years and it could almost double its net profit to Rs30.31 crore during 2017-18 from Rs15.68 crore a year ago.
According to sources, Kosamattam’s earlier plan was to raise funds through a a public offering.
While Manappuram Finance had hit the market with its initial public offering (IPO) in 1995 three years after the company’s incorporation, Muthoot Finance, not only the largest by far in the state among the gold loan companies, but the numero uno in the whole country in that category, issued shares to the public in 2011.
There are also reports that Muthoot Microfin is all set to tap the market. The Securities and Exchange Board of India (Sebi) has approved its draft red herring prospectus (DRHP), and according to reports, the company is eyeing early next year for its initial public offering (IPO).
Reports had it that Edelweiss will be the lead manager of the issue, whereas Credit Suisse, Motilal Oswal and SMC Capitals are said to be the other institutions working with the issue.
The unseemly developments that brought the NBFC giant IL&FS to its knees recently have acted as an eye opener to the industry and the incident has flagged the issue of asset-liability mismatch in the financial services sector, especially NBFCs.
Addressing a press following the Reserve Bank of India’s Monetary Policy Committee (MPC)’s policy rate announcement more than a week back, RBI deputy governor urged the financial institutions to rely more on equity and long-term funding base rather than running the business on fund raised through short-term papers.
Kosamattam which raised Rs250 crore recently through non-convertible debentures (NCDs) has plans to raise another Rs500 crore through the public issue of NCDs.