125853793 introduction-muthoot-finace
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Introduction-NEED FOR STUDY
Finance
The origins of Muthoot Finance can be traced back to 1939 when
[M.George Muthoot] ventured into financial services through a
partnership firm under the name of Muthoot M. George & Brothers
(MMG). MMG was a Chit Fund based out of Kozhencherry. In 1971,
the firm was renamed as Muthoot Bankers, and had begun to finance
loans using gold jewellery as collateral. The operations of Muthoot
Bankers was then renamed and incorporated as Muthoot Finance in
2001. Muthoot Finance falls under the category of Systematically
Important Non Banking Financial Company (NBFCs) of the RBI
guidelines. The company has more than 3,510 branches spread across 23
states of the country and is the largest gold loan company in India.
[1]
.
Muthoot Finance, according to the IMaCS Research & Analytics
Industry Reports [Gold Loans Market in India, 2009 (“IMaCS Industry
Report 2009”) and the 2010 update to the IMaCS IndustryReport 2009
(“IMaCS Industry Report (2010 Update)”)], is the largest Gold Loan
NBFC and has the largest network of branches for a Gold Loan NBFC in
India.
[4]
. Muthoot Finance is also the highest credit rated Gold Loan
company in India, with a credit rating of AA- (CRISIL) and LAA-
(ICRA) for its Long Term Debts and P1+ (CRISIL)
[5]
& A1+ (ICRA)
[6]
for its Short Term Debt Instruments.
Finance
The origins of Muthoot Finance can be traced back to 1939 when
[M.George Muthoot] ventured into financial services through a
partnership firm under the name of Muthoot M. George & Brothers
(MMG). MMG was a Chit Fund based out of Kozhencherry. In 1971,
the firm was renamed as Muthoot Bankers, and had begun to finance
loans using gold jewellery as collateral. The operations of Muthoot
Bankers was then renamed and incorporated as Muthoot Finance in
2001. Muthoot Finance falls under the category of Systematically
Important Non Banking Financial Company (NBFCs) of the RBI
guidelines. The company has more than 3,510 branches spread across 23
states of the country and is the largest gold loan company in India.
[1]
.
Muthoot Finance, according to the IMaCS Research & Analytics
Industry Reports [Gold Loans Market in India, 2009 (“IMaCS Industry
Report 2009”) and the 2010 update to the IMaCS IndustryReport 2009
(“IMaCS Industry Report (2010 Update)”)], is the largest Gold Loan
NBFC and has the largest network of branches for a Gold Loan NBFC in
India.
[4]
. Muthoot Finance is also the highest credit rated Gold Loan
company in India, with a credit rating of AA- (CRISIL) and LAA-
(ICRA) for its Long Term Debts and P1+ (CRISIL)
[5]
& A1+ (ICRA)
[6]
for its Short Term Debt Instruments.
‘Muthoot Gold Power’ is the lifestyle product of Muthoot Finance aimed
at mobilizing the Household gold in India which is estimated to be more
than 15000 tonnes. Muthoot Finance according to its company website
has "the largest gold loan portfolio in the country". Muthoot also
provides various financial services such as Insurance distribution,
Wealth Management, Foreign Exchange, Money Transfer and Vehicle &
Asset Finance. Muthoot Finance was selected as one of the Top 10
Finance companies to work for in India by Naukri.com
[7]
Muthoot
Finance privately placed 4% of its paid up capital to Private Equity
players - Barings India and Matrix Partners India for Rs.1.57 billion,
hence valuing the earlier privately held company at over $1 billion.
[8]
In terms of market capitalisation, Muthoot Finance is the second largest
company in Kerala, first being Federal Bank.
Information technology
Emsyne, the information technology wing of the group develops
products for the service, education and healthcare industry. Emsyne
offers on site and offshore services, whether project-based outsourcing /
assignments, or based on time and materials. The Core Products of
Emsyne are Edge - Educational Institutions Management System Finex -
Innovative Banking Automation System
at mobilizing the Household gold in India which is estimated to be more
than 15000 tonnes. Muthoot Finance according to its company website
has "the largest gold loan portfolio in the country". Muthoot also
provides various financial services such as Insurance distribution,
Wealth Management, Foreign Exchange, Money Transfer and Vehicle &
Asset Finance. Muthoot Finance was selected as one of the Top 10
Finance companies to work for in India by Naukri.com
[7]
Muthoot
Finance privately placed 4% of its paid up capital to Private Equity
players - Barings India and Matrix Partners India for Rs.1.57 billion,
hence valuing the earlier privately held company at over $1 billion.
[8]
In terms of market capitalisation, Muthoot Finance is the second largest
company in Kerala, first being Federal Bank.
Information technology
Emsyne, the information technology wing of the group develops
products for the service, education and healthcare industry. Emsyne
offers on site and offshore services, whether project-based outsourcing /
assignments, or based on time and materials. The Core Products of
Emsyne are Edge - Educational Institutions Management System Finex -
Innovative Banking Automation System
Precious Metals
Muthoot Precious Metals Corporation (MPMC) is one of the Group
companies of Muthoot Group, selling Coins & Bars of 999 Pure 24
Carat gold and silver across India through the outlets of Muthoot
Finance.
MPMC is importing gold bullions from Switzerland and converts them
into gold coins of smaller denominations so as to suit the investment
requirements of people from different income groups. The coins are sold
through more than 3400 outlets of Muthoot Finance Ltd. MPMC is one
of the leading sellers of Gold Coins in retail market. Gold Coins/Bars are
sold in denominations of 0.5, 1, 2, 4, 8, 10, 20 and 50grams
denominations. MPMC has silver coins in 20, 50 & 100grams
denominations. Coins are marketed in attractive blister packing’s with
Muthoot’s certificate of Purity and MPMCight.
MPMC has the gold & silver coins imprinted with the images of deities
and monuments such as Goddess lakshmi, Lord Ganesha, Lord
Ayyappa, Lord Sri Venkateswara (Balaji), Our lady of Velankanni, St.
Alphonsa, St. Gregorious, Lord Sri Padmanabha, Golden Temple,
Chatrapathy Sivaji, Mary Matha, St.George and Normal Coins etc..
Muthoot Precious Metals Corporation (MPMC) is one of the Group
companies of Muthoot Group, selling Coins & Bars of 999 Pure 24
Carat gold and silver across India through the outlets of Muthoot
Finance.
MPMC is importing gold bullions from Switzerland and converts them
into gold coins of smaller denominations so as to suit the investment
requirements of people from different income groups. The coins are sold
through more than 3400 outlets of Muthoot Finance Ltd. MPMC is one
of the leading sellers of Gold Coins in retail market. Gold Coins/Bars are
sold in denominations of 0.5, 1, 2, 4, 8, 10, 20 and 50grams
denominations. MPMC has silver coins in 20, 50 & 100grams
denominations. Coins are marketed in attractive blister packing’s with
Muthoot’s certificate of Purity and MPMCight.
MPMC has the gold & silver coins imprinted with the images of deities
and monuments such as Goddess lakshmi, Lord Ganesha, Lord
Ayyappa, Lord Sri Venkateswara (Balaji), Our lady of Velankanni, St.
Alphonsa, St. Gregorious, Lord Sri Padmanabha, Golden Temple,
Chatrapathy Sivaji, Mary Matha, St.George and Normal Coins etc..
From January 2012 MPMC is expanding its horizons, from a Trading
company to a gold Investment Company.
Securities
Media
Chennai Live 104.8 is India's first talk radio FM station. The station
would be focusing on knowledge centric and local content and will be
targeting the information and entertainment needs of Chennai's
intelligent community.
[9]
Healthcare
The Group operates several Diagnostic & Scan centers throughout
Kerala and 2 multi-specialty hospitals in Kozhencherry and
Pathanamthitta.
[citation needed]
Hotels & hospitality
Muthoot Hotels operates a 4 star resort in Thekkady (Kerala)
[10]
and also
operates 12 houseboats in the backwaters of Kerala under the brand
Muthoot River Escapes.
[11]
Kaapi Club is a chain of South Indian coffee outlets managed by
Muthoot Hotels.
[12]
Muthoot Hotels is in the process of constructing a 5
star luxury hotel in the city of Kochi and 5 star beach resort in
Mararikulam.
[13]
company to a gold Investment Company.
Securities
Media
Chennai Live 104.8 is India's first talk radio FM station. The station
would be focusing on knowledge centric and local content and will be
targeting the information and entertainment needs of Chennai's
intelligent community.
[9]
Healthcare
The Group operates several Diagnostic & Scan centers throughout
Kerala and 2 multi-specialty hospitals in Kozhencherry and
Pathanamthitta.
[citation needed]
Hotels & hospitality
Muthoot Hotels operates a 4 star resort in Thekkady (Kerala)
[10]
and also
operates 12 houseboats in the backwaters of Kerala under the brand
Muthoot River Escapes.
[11]
Kaapi Club is a chain of South Indian coffee outlets managed by
Muthoot Hotels.
[12]
Muthoot Hotels is in the process of constructing a 5
star luxury hotel in the city of Kochi and 5 star beach resort in
Mararikulam.
[13]
Housing & infrastructure
The projects of Muthoot Builders are primarily situated in central and
south Kerala, Muthoot has a track record of more than 30 completed
projects including commercial and residential spaces.
[14]
Other divisions
Muthoot has interests in Power Generation through windmill farms in
the state of Tamil Nadu. The group also manages a school in New
Delhi
[15]
and 2 Nursing Colleges in Kerala. In the year 2008 the group
re-entered the plantation business, the group has acquired 1000 acres of
land in Sawantvadi, Maharashtra as a pilot planting of rubber.
Philanthropy
Muthoot M George Charity Foundation Set up in memory of the Late
M. George Muthoot, the Foundation has been extending financial aid for
its employees as part of the Staff Welfare measures. Every branch of
The Muthoot Group is actively involved in Community Development
and Social Welfare. The Muthoot Foundation frequently grants medical
and financial aid to deserving individuals through its welfare programs.
Community support is a corporate responsibility. The Muthoot Group
maintains its position as a valued and responsible corporate citizen by
enhancing the quality of life in the communities where they do business.
It is very important for a corporate to support the community in which it
The projects of Muthoot Builders are primarily situated in central and
south Kerala, Muthoot has a track record of more than 30 completed
projects including commercial and residential spaces.
[14]
Other divisions
Muthoot has interests in Power Generation through windmill farms in
the state of Tamil Nadu. The group also manages a school in New
Delhi
[15]
and 2 Nursing Colleges in Kerala. In the year 2008 the group
re-entered the plantation business, the group has acquired 1000 acres of
land in Sawantvadi, Maharashtra as a pilot planting of rubber.
Philanthropy
Muthoot M George Charity Foundation Set up in memory of the Late
M. George Muthoot, the Foundation has been extending financial aid for
its employees as part of the Staff Welfare measures. Every branch of
The Muthoot Group is actively involved in Community Development
and Social Welfare. The Muthoot Foundation frequently grants medical
and financial aid to deserving individuals through its welfare programs.
Community support is a corporate responsibility. The Muthoot Group
maintains its position as a valued and responsible corporate citizen by
enhancing the quality of life in the communities where they do business.
It is very important for a corporate to support the community in which it
operates. The Muthoot M. George Charitable Foundation is approached
by numerous organizations and individuals requesting financial and
medical assistance.
Muthoot Medical Centers at Kozhencherry and Pathanamthitta are
super specialty hospitals set up in the rural areas of Kozhencherry and
Pathanamthitta. They are both organizations established in 1989.
Environment research foundation
The Periyar Foundation set up by Muthoot Hotels is based in the town
of Thekkady, near the Periyar National Park has undertaken several
projects for the conservation of the national park including 'vasantha
sena'
[16]
and a research study along with the National Institute of
Advance Studies for the conservation of 'Nocturnal Flying Squirrels'.
Initial public offering (IPO), also referred to simply as a "public
offering", is when a company issues common stock or shares to
the public for the first time. They are often issued by smaller,
younger companies seeking capital to expand, but can also be
done by large privately-owned companies looking to become
publicly traded.
by numerous organizations and individuals requesting financial and
medical assistance.
Muthoot Medical Centers at Kozhencherry and Pathanamthitta are
super specialty hospitals set up in the rural areas of Kozhencherry and
Pathanamthitta. They are both organizations established in 1989.
Environment research foundation
The Periyar Foundation set up by Muthoot Hotels is based in the town
of Thekkady, near the Periyar National Park has undertaken several
projects for the conservation of the national park including 'vasantha
sena'
[16]
and a research study along with the National Institute of
Advance Studies for the conservation of 'Nocturnal Flying Squirrels'.
Initial public offering (IPO), also referred to simply as a "public
offering", is when a company issues common stock or shares to
the public for the first time. They are often issued by smaller,
younger companies seeking capital to expand, but can also be
done by large privately-owned companies looking to become
publicly traded.
In an IPO, the issuer may obtain the assistance of an underwriting
firm, which helps it determine what type of security to issue
(common or preferred), best offering price and time to bring it to
market. Initial Public Offering (IPO) in India means the selling of
the shares of a company, for the first time, to the public in the
country's capital markets. This is done by giving to the public,
shares that are either owned by the promoters of the company or
by issuing new shares.
During an Initial Public Offer (IPO) the shares are given to the
public at a discount on the intrinsic value of the shares and this is
the reason that the investors buy shares during the Initial Public
Offering (IPO) in order to make profits for themselves. IPO in
India is done through various methods like book building method,
fixed price method, or a mixture of both. The method of book
building has been introduced in the country in 1999 and it helps
the company to find out the demand and price of its shares. A
merchant banker is nominated as a book runner by the Issuer of
the IPO. The company that is issuing the Initial Public Offering
(IPO) decides the number of shares that it will issue and also fixes
the price band of the shares. All these information are mentioned
in the company's red herring prospectus. During the company's
Initial Public Offering (IPO) in India, an electronic book is opened
for at least five days. During this period of time, bidding takes
firm, which helps it determine what type of security to issue
(common or preferred), best offering price and time to bring it to
market. Initial Public Offering (IPO) in India means the selling of
the shares of a company, for the first time, to the public in the
country's capital markets. This is done by giving to the public,
shares that are either owned by the promoters of the company or
by issuing new shares.
During an Initial Public Offer (IPO) the shares are given to the
public at a discount on the intrinsic value of the shares and this is
the reason that the investors buy shares during the Initial Public
Offering (IPO) in order to make profits for themselves. IPO in
India is done through various methods like book building method,
fixed price method, or a mixture of both. The method of book
building has been introduced in the country in 1999 and it helps
the company to find out the demand and price of its shares. A
merchant banker is nominated as a book runner by the Issuer of
the IPO. The company that is issuing the Initial Public Offering
(IPO) decides the number of shares that it will issue and also fixes
the price band of the shares. All these information are mentioned
in the company's red herring prospectus. During the company's
Initial Public Offering (IPO) in India, an electronic book is opened
for at least five days. During this period of time, bidding takes
place which means that people who are interested in buying the
shares of the Company makes an offer within the fixed price
band.
Once the book building is closed then the issuer as well as the
book runner of the Initial Public Offering (IPO) evaluate the offers
and then determine a fixed price. The offers for shares that fall
below the fixed price are rejected. The successful bidders are
then allotted the shares IPO’s can be a risky investment. For the
individual investor, it is tough to predict what the stock or shares
will do on its initial day of trading and in the near future since
there is often little historical data with which to analyze the
company. Also, most IPO’s are of companies going through a
transitory growth period, and they are therefore subject to
additional uncertainty regarding their future value.
Different kinds of Issues:
shares of the Company makes an offer within the fixed price
band.
Once the book building is closed then the issuer as well as the
book runner of the Initial Public Offering (IPO) evaluate the offers
and then determine a fixed price. The offers for shares that fall
below the fixed price are rejected. The successful bidders are
then allotted the shares IPO’s can be a risky investment. For the
individual investor, it is tough to predict what the stock or shares
will do on its initial day of trading and in the near future since
there is often little historical data with which to analyze the
company. Also, most IPO’s are of companies going through a
transitory growth period, and they are therefore subject to
additional uncertainty regarding their future value.
Different kinds of Issues:
IPO VALUATION & DATA INTERPRETATION
Initial Public Offering - 2011
This IPO report provides information about the IPO's came in to India
stock market in year 2011. The report tells the amount raised by
companies through public offerings in primary stock market in 2011.
Summary of IPO market activities:
Initial Public Offering - 2011
This IPO report provides information about the IPO's came in to India
stock market in year 2011. The report tells the amount raised by
companies through public offerings in primary stock market in 2011.
Summary of IPO market activities:
Capital raised through different IPO:
Case Study: Muthoot Finance IPO
Objects of the Issue:
1. To augment capital base to meet future capital requirement to
provide for funding of loans to customers;
Case Study: Muthoot Finance IPO
Objects of the Issue:
1. To augment capital base to meet future capital requirement to
provide for funding of loans to customers;
2. General corporate purposes.
Company Background:
Muthoot Finance Ltd is a non-deposit taking NBFC in the business of
lending against household used gold jewellery to individuals. Muthoot
Finance’s operating history has evolved over a period of 70 years since
Mr. M. George Muthoot founded a gold loan business in 1939. MFL
received the NBFC licence from the RBI in 2001.
Issue Details:
The NBFC has the largest branch network among gold loan providers in
India with 2,611 branches and a strong presence in under-served rural
Company Background:
Muthoot Finance Ltd is a non-deposit taking NBFC in the business of
lending against household used gold jewellery to individuals. Muthoot
Finance’s operating history has evolved over a period of 70 years since
Mr. M. George Muthoot founded a gold loan business in 1939. MFL
received the NBFC licence from the RBI in 2001.
Issue Details:
The NBFC has the largest branch network among gold loan providers in
India with 2,611 branches and a strong presence in under-served rural
and semi-urban markets in India with total Assets under Management
of Rs 12,897 Cr as of November 2010.
During 2010, the company received fund infusion amounting to Rs 2.5
bn from private equity players like Baring India Private Equity, Matrix
Partners India, Kotak India Private Equity Fund and Wellcome Trust for
a 6% stake in the company.
Further, in 2011 Wellcome Trust picked up additional 1% stake from the
promoters, taking the total stake of private equity investors to 7% in
the company. The NBFC raised Rs 130 Cr from 11 Anchor investors at Rs
170/share. The anchor investors include Citigroup, Goldman Sachs,
Credit Suisee amongst others.
Company Financials:
Muthoot Finance’s AUM increased at a CAGR of 74% from Rs 8 bn. in
FY06 to Rs 74 bn. in FY10 driven by a rise in pledged gold and a
significant spurt in gold prices. On the back of growth in AUM, interest
income increased at a CAGR of 66% from Rs 1.4 bn. in FY06 to Rs 10.8
bn. in FY10. Profit after tax (PAT) improved from Rs 271 mn. to Rs 2,276
mn. in FY10.
The adjusted EPS and adjusted book value of the company increased at
a CAGR of 53% and 43% respectively over FY06-10. Gross NPA’s have
of Rs 12,897 Cr as of November 2010.
During 2010, the company received fund infusion amounting to Rs 2.5
bn from private equity players like Baring India Private Equity, Matrix
Partners India, Kotak India Private Equity Fund and Wellcome Trust for
a 6% stake in the company.
Further, in 2011 Wellcome Trust picked up additional 1% stake from the
promoters, taking the total stake of private equity investors to 7% in
the company. The NBFC raised Rs 130 Cr from 11 Anchor investors at Rs
170/share. The anchor investors include Citigroup, Goldman Sachs,
Credit Suisee amongst others.
Company Financials:
Muthoot Finance’s AUM increased at a CAGR of 74% from Rs 8 bn. in
FY06 to Rs 74 bn. in FY10 driven by a rise in pledged gold and a
significant spurt in gold prices. On the back of growth in AUM, interest
income increased at a CAGR of 66% from Rs 1.4 bn. in FY06 to Rs 10.8
bn. in FY10. Profit after tax (PAT) improved from Rs 271 mn. to Rs 2,276
mn. in FY10.
The adjusted EPS and adjusted book value of the company increased at
a CAGR of 53% and 43% respectively over FY06-10. Gross NPA’s have
been contained to less than 0.5% in the past three years. Muthoot
Finance enjoys a strong capital to risk adjusted ratio (CRAR) of 15%
which is in excess of the RBI’s requirement of 12%.The company
frequently sells its portfolio under bilateral direct assignments which
also helps it keep its capital ratio strong. In 2010, the company raised Rs
2.5 bn. from private equity players, which will help it shore up capital
base and fund its growth.
Below are the balance sheets and P/L account details of Muthoot
Finance:
Finance enjoys a strong capital to risk adjusted ratio (CRAR) of 15%
which is in excess of the RBI’s requirement of 12%.The company
frequently sells its portfolio under bilateral direct assignments which
also helps it keep its capital ratio strong. In 2010, the company raised Rs
2.5 bn. from private equity players, which will help it shore up capital
base and fund its growth.
Below are the balance sheets and P/L account details of Muthoot
Finance:
Key Positives:
Muthoot - Established Brand:
MFL has an established track record in the niche Gold loan segment,
and has a gold loan portfolio of Rs. 12,897 Cr as on November 30 2010.
The Muthoot Group enjoys strong market knowledge and a good
franchise in southern India on the back of significant experience of the
promoters of the Group since 1939. An early entry in this business, not
only in South India but also in other regions, has helped the company
develop a strong brand image, wide distribution network and AUM. The
growth of the company is also aided by the fact that gold loans are
commonly accepted form of financing amongst households in southern
India.
Muthoot - Established Brand:
MFL has an established track record in the niche Gold loan segment,
and has a gold loan portfolio of Rs. 12,897 Cr as on November 30 2010.
The Muthoot Group enjoys strong market knowledge and a good
franchise in southern India on the back of significant experience of the
promoters of the Group since 1939. An early entry in this business, not
only in South India but also in other regions, has helped the company
develop a strong brand image, wide distribution network and AUM. The
growth of the company is also aided by the fact that gold loans are
commonly accepted form of financing amongst households in southern
India.
Niche Business Model:
MFL is the largest player in the niche business of gold financing, both in
terms of AUM and distribution network. The gold loan asset class is
characterized by small ticket size loans secured against gold ornaments.
The average ticket size is of around Rs 30,000 for MFL. While the
contractual tenure of the loan contract is 12 months, the loan tenure is
typically around 3-4 months. MFL’s AUM has grown at a four-year
CAGR of 74% to Rs 74 bn in FY10. The company has grown its market
share by 9% during FY07- FY10 backed by its strong presence in the
South India Market.
Robust Industry Outlook:
According to the IMACs industry report, based on the assessment of
the emerging dynamics and competitive landscape, the Gold Loans
market is expected to grow at between 35% and 40% over the next
three years. Moreover, as the market is currently under-penetrated, it
is expected that the Gold Loans market will offer enough opportunities
for portfolio expansion and retain attractive margins for all existing
specialized NBFCs, banks and new entrants. The branch expansion and
marketing initiatives of various specialized NBFCs are anticipated to
give a strong boost to the acceptability of Gold Loans and lead to
further growth in the Gold Loans market.
MFL is the largest player in the niche business of gold financing, both in
terms of AUM and distribution network. The gold loan asset class is
characterized by small ticket size loans secured against gold ornaments.
The average ticket size is of around Rs 30,000 for MFL. While the
contractual tenure of the loan contract is 12 months, the loan tenure is
typically around 3-4 months. MFL’s AUM has grown at a four-year
CAGR of 74% to Rs 74 bn in FY10. The company has grown its market
share by 9% during FY07- FY10 backed by its strong presence in the
South India Market.
Robust Industry Outlook:
According to the IMACs industry report, based on the assessment of
the emerging dynamics and competitive landscape, the Gold Loans
market is expected to grow at between 35% and 40% over the next
three years. Moreover, as the market is currently under-penetrated, it
is expected that the Gold Loans market will offer enough opportunities
for portfolio expansion and retain attractive margins for all existing
specialized NBFCs, banks and new entrants. The branch expansion and
marketing initiatives of various specialized NBFCs are anticipated to
give a strong boost to the acceptability of Gold Loans and lead to
further growth in the Gold Loans market.
Healthy Asset Quality:
Muthoot Finance has maintained strong asset quality supported by its
comfortable loan-to-value (LTV) ratio at origination, robust systems and
processes, and the highly secured nature of the LAG business. Strong
underwriting standards have resulted in very low gross non-performing
assets (NPA) of 0.46% for the company. Sentiment attached to the
household ornament also support low NPA.
Diversified Sources of Funds:
Muthoot Finance has access to a diversified resource profile. As of
FY10, it had a total debt outstanding of Rs 52 bn. Its established track
record helps to mobilise funds from retail investors by issuing non-
convertible debentures (NCD) through its branches offering interest
rates of 11-11.5%.
Stringent Internal Controls System:
The internal audit team of the company consists of 500 members and is
spread out in different locations. The company conducts regular audits
of branches to check the efficacy of the gold assessment quality of the
branches and other operational processes of the branches. MFL is
exposed to operational risks, as its transactions mainly involve gold
Muthoot Finance has maintained strong asset quality supported by its
comfortable loan-to-value (LTV) ratio at origination, robust systems and
processes, and the highly secured nature of the LAG business. Strong
underwriting standards have resulted in very low gross non-performing
assets (NPA) of 0.46% for the company. Sentiment attached to the
household ornament also support low NPA.
Diversified Sources of Funds:
Muthoot Finance has access to a diversified resource profile. As of
FY10, it had a total debt outstanding of Rs 52 bn. Its established track
record helps to mobilise funds from retail investors by issuing non-
convertible debentures (NCD) through its branches offering interest
rates of 11-11.5%.
Stringent Internal Controls System:
The internal audit team of the company consists of 500 members and is
spread out in different locations. The company conducts regular audits
of branches to check the efficacy of the gold assessment quality of the
branches and other operational processes of the branches. MFL is
exposed to operational risks, as its transactions mainly involve gold
jewellery and cash. MFL maintains its gold ornaments in strong rooms
that are insured against fire, theft and employees frauds.
Risks:
Downturn in Gold prices:
A significant rise in gold prices along with the increase in loan
requirement by customers has boosted Muthoot Finance's AUM. Any
sharp fall in gold prices could pose challenges. However, Muthoot
Finance has a comfortable LTV ratio in line with other gold financing
NBFCs ranging from 60-85%, which helps it to combat the downside in
gold prices. Also, the shorter tenure of gold loans (usually ranging from
three to six months) offers flexibility of resetting the LTVs.
Business Concentration in the Southern India:
Muthoot Finance derives 98% of revenues from the gold loan business.
Also, it is expected to remain concentrated in South India, which
accounts for 75% of AUM for the short to medium term despite
aggressive growth plans in the northern and western states.
Royalty Payment to Promoters:
The company has a royalty clause which is not implemented yet, in
favour of promoters for allowing the company to use the Muthoot
that are insured against fire, theft and employees frauds.
Risks:
Downturn in Gold prices:
A significant rise in gold prices along with the increase in loan
requirement by customers has boosted Muthoot Finance's AUM. Any
sharp fall in gold prices could pose challenges. However, Muthoot
Finance has a comfortable LTV ratio in line with other gold financing
NBFCs ranging from 60-85%, which helps it to combat the downside in
gold prices. Also, the shorter tenure of gold loans (usually ranging from
three to six months) offers flexibility of resetting the LTVs.
Business Concentration in the Southern India:
Muthoot Finance derives 98% of revenues from the gold loan business.
Also, it is expected to remain concentrated in South India, which
accounts for 75% of AUM for the short to medium term despite
aggressive growth plans in the northern and western states.
Royalty Payment to Promoters:
The company has a royalty clause which is not implemented yet, in
favour of promoters for allowing the company to use the Muthoot
trademarks, which is fixed at 1% of the annual income, subject to a
maximum of 3% of annual profit.
Regulatory Hitches:
The impact of the State Money Lenders Act for NBFCs, the decision on
which is awaited from the Supreme Court, could not only adversely
affect Muthoot Finance's lending rates but also increase its operational
expenditure, given the requirements (under the act) of registering all
establishments with state authorities and complying with state
regulations. The decision of the Supreme Court regarding this issue
remains a sensitive factor for the company.
Valuations
Muthoot Finance’s market cap is coming to Rs 5,847 Cr ± Rs 6,505 on a
price band of Rs 160 ± Rs 175. The company is asking for a price to
maximum of 3% of annual profit.
Regulatory Hitches:
The impact of the State Money Lenders Act for NBFCs, the decision on
which is awaited from the Supreme Court, could not only adversely
affect Muthoot Finance's lending rates but also increase its operational
expenditure, given the requirements (under the act) of registering all
establishments with state authorities and complying with state
regulations. The decision of the Supreme Court regarding this issue
remains a sensitive factor for the company.
Valuations
Muthoot Finance’s market cap is coming to Rs 5,847 Cr ± Rs 6,505 on a
price band of Rs 160 ± Rs 175. The company is asking for a price to
earnings multiple of 13.6-14.9 times its annualized FY11 EPS of Rs 11.7
which is at a discount to Manappurram General Finance despite the
former having a higher market share of 20% while Manappurram just
has a market share of 6.8% as on FY10. The price to book value is 2.9-
3.04 times its post issue book value which is at marginal premium to
Manappurram General Finance.
At the upper price band of `175 and lower price band of `160, the issue
is priced at around 4.95x and 4.53 times its 8MFY11 book value of
`35.3. On its post issue book value of `54.68 the issue is priced at
around 3.2x and 2.93x (at the higher band and lower band
respectively). Manappuram General Finance & Leasing Limited (MGF),
the only listed company in India which is in the similar business of gold
financing with less than half of its size in terms of income is tradingat a
P/B of 2.81x.
We believe Muthoot Finance which has a better reach than its
competitors in terms of branch network and higher return on networth
compared to MGF, deserves a premium valuation. On the Price to
earning methodology, the issue is priced at around 14.9x and 13.6x on
the post issue annualized EPS of 11.76 for 8MFY11, which is ~20%
cheap when compared to MGF which is trading at a P/E of 18.8x on its
annualized 9MFY11 EPS of 6.76. Muthoot finance enjoys superior
which is at a discount to Manappurram General Finance despite the
former having a higher market share of 20% while Manappurram just
has a market share of 6.8% as on FY10. The price to book value is 2.9-
3.04 times its post issue book value which is at marginal premium to
Manappurram General Finance.
At the upper price band of `175 and lower price band of `160, the issue
is priced at around 4.95x and 4.53 times its 8MFY11 book value of
`35.3. On its post issue book value of `54.68 the issue is priced at
around 3.2x and 2.93x (at the higher band and lower band
respectively). Manappuram General Finance & Leasing Limited (MGF),
the only listed company in India which is in the similar business of gold
financing with less than half of its size in terms of income is tradingat a
P/B of 2.81x.
We believe Muthoot Finance which has a better reach than its
competitors in terms of branch network and higher return on networth
compared to MGF, deserves a premium valuation. On the Price to
earning methodology, the issue is priced at around 14.9x and 13.6x on
the post issue annualized EPS of 11.76 for 8MFY11, which is ~20%
cheap when compared to MGF which is trading at a P/E of 18.8x on its
annualized 9MFY11 EPS of 6.76. Muthoot finance enjoys superior
return ratios with ROAE at ~ 50.0% and ROAA at ~3.9% mainly driven by
it superior credit rating (which enables it to borrow at competitive rates
thereby leading to healthy 10%+ NIMs) coupled with its high leverage
of ~9.0x. The current equity raising initiative by the company will
improve its capital adequacy ratio in excess of 23% from 15.06% in
November 2010, thereby helping it to maintain loan growth and
support NIM going forward. We believe the company’s leadership
position in the gold loan business (market share of ~20.0%), strong
capital raising ability, superior NIMs and return ratios, established
brand image and opportunity in the gold financing business are key
value drivers for Muthoot Finance going forward.
Muthoot Finance annualized EPS for 8M FY 2011 on post-issue equity
works out to Rs 11.8. At the price band of Rs 160 to Rs 175 P/E works
out to 13.6 to 14.9 times. Manappuram General Finance and Leasing
Company (MAGFIL) another Gold loan company with less than half of
its size in terms of income is currently trading at P/E of 22.4.
Current book value of Muthoot Finance is just Rs 35. Post-issue Book
Value works out to Rs 52.6 and Rs 54.7 at issue price of Rs 160 and Rs
175, respectively. P/BV at both the bands works out to be 3.0 and 3.2
times, respectively. MAGFIL is currently trading at a P/BV of 2.9.
it superior credit rating (which enables it to borrow at competitive rates
thereby leading to healthy 10%+ NIMs) coupled with its high leverage
of ~9.0x. The current equity raising initiative by the company will
improve its capital adequacy ratio in excess of 23% from 15.06% in
November 2010, thereby helping it to maintain loan growth and
support NIM going forward. We believe the company’s leadership
position in the gold loan business (market share of ~20.0%), strong
capital raising ability, superior NIMs and return ratios, established
brand image and opportunity in the gold financing business are key
value drivers for Muthoot Finance going forward.
Muthoot Finance annualized EPS for 8M FY 2011 on post-issue equity
works out to Rs 11.8. At the price band of Rs 160 to Rs 175 P/E works
out to 13.6 to 14.9 times. Manappuram General Finance and Leasing
Company (MAGFIL) another Gold loan company with less than half of
its size in terms of income is currently trading at P/E of 22.4.
Current book value of Muthoot Finance is just Rs 35. Post-issue Book
Value works out to Rs 52.6 and Rs 54.7 at issue price of Rs 160 and Rs
175, respectively. P/BV at both the bands works out to be 3.0 and 3.2
times, respectively. MAGFIL is currently trading at a P/BV of 2.9.
Valuation (Methodology) - This is fair price?
At the upper price band of `175 and lower price band of `160, the
issue is priced at around 4.95x and 4.53 times its FY11 book value
of `35.3.
At the upper price band of `175 and lower price band of `160, the
issue is priced at around 4.95x and 4.53 times its FY11 book value
of `35.3.
Manappuram General Finance & Leasing Limited (MGF), the only
listed company in India which is in the similar business of gold
financing with less than half of its size in terms of income is
trading at a P/B of 2.81x.
Muthoot Finance: Better reach than its competitors compared to
MGF, deserves a premium valuation.
listed company in India which is in the similar business of gold
financing with less than half of its size in terms of income is
trading at a P/B of 2.81x.
Muthoot Finance: Better reach than its competitors compared to
MGF, deserves a premium valuation.
Why to invest?
Balance Sheet Valuation:
Growth Rate:
Muthoot Finance Ltd. is expected to grow at to have CAGR of 48 %, We
take fixed growth rate of 48% for DCF valuation for coming 5 years.
Reinvestment Rate:
How much equity the firm reinvests back into its businesses in the form
of net capital expenditures and investments in working capital.
Equity Reinvestment Rate = Growth Rate / ROE = 48/52 = 92.29 %
Discounted Cash Flow Valuation (Why to invest):
A valuation method used to estimate the attractiveness of an
investment opportunity.
Discounted cash flow (DCF) analysis uses future free cash flow
projections and discounts them (most often using the weighted
average cost of capital) to arrive at a present value, which is used
to evaluate the potential for investment.
Balance Sheet Valuation:
Growth Rate:
Muthoot Finance Ltd. is expected to grow at to have CAGR of 48 %, We
take fixed growth rate of 48% for DCF valuation for coming 5 years.
Reinvestment Rate:
How much equity the firm reinvests back into its businesses in the form
of net capital expenditures and investments in working capital.
Equity Reinvestment Rate = Growth Rate / ROE = 48/52 = 92.29 %
Discounted Cash Flow Valuation (Why to invest):
A valuation method used to estimate the attractiveness of an
investment opportunity.
Discounted cash flow (DCF) analysis uses future free cash flow
projections and discounts them (most often using the weighted
average cost of capital) to arrive at a present value, which is used
to evaluate the potential for investment.
If the value arrived at through DCF analysis is higher than the
current cost of the investment, the opportunity may be a good
one.
Calculated as:
Free cash Flow:
Free cash flow represents the actual amount of cash that a company
has left from its - for example, developing new products, paying
dividends to investors or doing share buybacks.
A wide variety of methods can be used to determine discount rates, but
in most cases, these calculations resemble art more than science. Still,
it is better to be generally correct than precisely incorrect, so it is worth
your while to use a rigorous method to estimate the discount rate. A
good strategy is to apply the concepts of the weighted average cost of
current cost of the investment, the opportunity may be a good
one.
Calculated as:
Free cash Flow:
Free cash flow represents the actual amount of cash that a company
has left from its - for example, developing new products, paying
dividends to investors or doing share buybacks.
A wide variety of methods can be used to determine discount rates, but
in most cases, these calculations resemble art more than science. Still,
it is better to be generally correct than precisely incorrect, so it is worth
your while to use a rigorous method to estimate the discount rate. A
good strategy is to apply the concepts of the weighted average cost of
capital (WACC). The WACC is essentially a blend of the cost of equity
and the after-tax cost of debt.
Weighted Average Cost of Capital (WACC)
The WACC is the weighted average of the cost of equity and the cost of
debt based on the proportion of debt and equity in the company's
capital structure.
WACC = Cost of Equity + Cost of Debt
Present Value:
The present value of a single or multiple future payments (known as
cash flows) is the nominal amounts of money to change hands at some
future date, discounted to account for the time value of money, and
other factors such as investment risk. A given amount of money is
always more valuable sooner than later since this enables one to take
advantage of investment opportunities. Present values are therefore
smaller than corresponding future values.
and the after-tax cost of debt.
Weighted Average Cost of Capital (WACC)
The WACC is the weighted average of the cost of equity and the cost of
debt based on the proportion of debt and equity in the company's
capital structure.
WACC = Cost of Equity + Cost of Debt
Present Value:
The present value of a single or multiple future payments (known as
cash flows) is the nominal amounts of money to change hands at some
future date, discounted to account for the time value of money, and
other factors such as investment risk. A given amount of money is
always more valuable sooner than later since this enables one to take
advantage of investment opportunities. Present values are therefore
smaller than corresponding future values.
When future cash flow of the company is divided by the discount rate
we get the present value of that predicted years cash flow.
Where, n = year
Terminal Value:
Perpetuity Growth Model: The Perpetuity Growth Model accounts for
the value of free cash flows that continues into perpetuity in the future,
growing at an assumed constant rate. Here, the projected free cash
flow in the first year beyond the projection horizon (N+1) is used.
We have assumed perpetuity growth rate for Muthoot Finance Ltd. as
6%. Beyond 2016 Muthoot Finance Ltd. is expected to grow at 6% p.a
i.e. at its perpetuity rate, hence net income for the year 2016 will be:
Net income of 2016 × (1+ perpetuity growth rate)
= 54051 × (1+0.06)
we get the present value of that predicted years cash flow.
Where, n = year
Terminal Value:
Perpetuity Growth Model: The Perpetuity Growth Model accounts for
the value of free cash flows that continues into perpetuity in the future,
growing at an assumed constant rate. Here, the projected free cash
flow in the first year beyond the projection horizon (N+1) is used.
We have assumed perpetuity growth rate for Muthoot Finance Ltd. as
6%. Beyond 2016 Muthoot Finance Ltd. is expected to grow at 6% p.a
i.e. at its perpetuity rate, hence net income for the year 2016 will be:
Net income of 2016 × (1+ perpetuity growth rate)
= 54051 × (1+0.06)
= Rs. 57295 mn
Reinvestment rate after 2016 (Terminal Point):
Here, return on equity is rate at which company expect to get returns
on its investments after terminal point i.e. 2012. Return on equity will
drop to the stable period cost of capital of 9.5%.
Reinvestment rate (terminal point) =Perpetuity Growth rate / Return on
Equity = 6/9.5 = 63%
Free cash flow = EBIT - [EBIT x Reinvestment Rate]
Therefore, Free cash flow 2017 = 57295 - [57295 x 63%] = Rs. 21109
mn
Gordon Growth Model:
The model uses this formula:
Free cash flow of the year after the terminal year/ (Discount Rate -
Perpetuity Growth Rate)
Therefore, Terminal Value = (21109 × 100)/12 = Rs 175904 mn
Present value of Terminal year = 175904 / (1.10) ^6 = Rs. 100100
mn
Calculating Total Enterprise Value
Reinvestment rate after 2016 (Terminal Point):
Here, return on equity is rate at which company expect to get returns
on its investments after terminal point i.e. 2012. Return on equity will
drop to the stable period cost of capital of 9.5%.
Reinvestment rate (terminal point) =Perpetuity Growth rate / Return on
Equity = 6/9.5 = 63%
Free cash flow = EBIT - [EBIT x Reinvestment Rate]
Therefore, Free cash flow 2017 = 57295 - [57295 x 63%] = Rs. 21109
mn
Gordon Growth Model:
The model uses this formula:
Free cash flow of the year after the terminal year/ (Discount Rate -
Perpetuity Growth Rate)
Therefore, Terminal Value = (21109 × 100)/12 = Rs 175904 mn
Present value of Terminal year = 175904 / (1.10) ^6 = Rs. 100100
mn
Calculating Total Enterprise Value
Total Enterprise = Present value of Terminal- Debt = 100100 - 90830 =
Rs. 9270 mn
Fair value = Rs 9270 mn
Number of outstanding shares = 51.5 mn
Fair value of per share = Rs. 180.
On 29
th
Feb 2012:
Rs. 9270 mn
Fair value = Rs 9270 mn
Number of outstanding shares = 51.5 mn
Fair value of per share = Rs. 180.
On 29
th
Feb 2012:
Unchanging values...in changing time
We are the largest gold financing company in India in terms of loan
portfolio, according to the 2010 update to the IMaCS Research &
Analytics Industry Reports, Gold Loans Market in India, 2009 ("IMaCS
Industry Report, (2010 Update)"). We provide personal and business
loans secured by gold jewellery, or Gold Loans, primarily to individuals
who possess gold jewellery but could not access formal credit within a
reasonable time, or to whom credit may not be available at all, to meet
unanticipated or other short-term liquidity requirements. According to
the IMaCS Industry Report (2010 update), as of March 31, 2010 our
branch network was the largest among gold loan NBFCs in India. Our
Gold Loan portfolio as of September 30, 2011 comprised approximately
5.5 million loan accounts in India that we serviced through more than
3,274 branches across 20 states, the national capital territory of Delhi
and four union territories in India. As of September 30, 2011, we
employed 21,543 persons in our operations.
We are a "Systemically Important Non-deposit taking NBFC"
headquartered in the southern Indian state of Kerala. Our operating
history has evolved over a period of 72 years since M George Muthoot
(the father of our Promoters) founded a gold loan business in 1939
under the heritage of a trading business established by his father, Ninan
We are the largest gold financing company in India in terms of loan
portfolio, according to the 2010 update to the IMaCS Research &
Analytics Industry Reports, Gold Loans Market in India, 2009 ("IMaCS
Industry Report, (2010 Update)"). We provide personal and business
loans secured by gold jewellery, or Gold Loans, primarily to individuals
who possess gold jewellery but could not access formal credit within a
reasonable time, or to whom credit may not be available at all, to meet
unanticipated or other short-term liquidity requirements. According to
the IMaCS Industry Report (2010 update), as of March 31, 2010 our
branch network was the largest among gold loan NBFCs in India. Our
Gold Loan portfolio as of September 30, 2011 comprised approximately
5.5 million loan accounts in India that we serviced through more than
3,274 branches across 20 states, the national capital territory of Delhi
and four union territories in India. As of September 30, 2011, we
employed 21,543 persons in our operations.
We are a "Systemically Important Non-deposit taking NBFC"
headquartered in the southern Indian state of Kerala. Our operating
history has evolved over a period of 72 years since M George Muthoot
(the father of our Promoters) founded a gold loan business in 1939
under the heritage of a trading business established by his father, Ninan
Mathai Muthoot, in 1887.Since our formation, we have broadened the
scale and geographic scope of our retail lending operations so that, as
of March 31, 2010, we were India's largest provider of Gold Loans. In
the years ended March 31, 2008, 2009, 2010, 2011 and in the period
ended September 30, 2011, revenues from our Gold Loan business
constituted 95.97%, 96.71%, 98.08%, 98.75% and 99.01%, respectively,
of our total income. In addition to our Gold Loans business, we provide
money transfer services through our branches as sub-agents of various
registered money transfer agencies, and recently have commenced
providing collection agency services. We also operate three windmills in
the state of Tamil Nadu.
We issue secured non-convertible debentures called "Muthoot Gold
Bonds" on a private placement basis. Proceeds from our issuance of
Muthoot Gold Bonds form a significant source of funds for our Gold
Loan business. We also rely on bank loans and subordinated debt
instruments as our sources of funds. As per our audited financial
statements as of September 30, 2011 we had Rs. 50,415 million in
outstanding Muthoot Gold Bonds and Rs.122,152 million in other
borrowings. We also raise capital by selling a portion of our loan
receivables under bilateral assignment agreements with various banks.
We also raise capital by issuing commercial paper and listed & credit
scale and geographic scope of our retail lending operations so that, as
of March 31, 2010, we were India's largest provider of Gold Loans. In
the years ended March 31, 2008, 2009, 2010, 2011 and in the period
ended September 30, 2011, revenues from our Gold Loan business
constituted 95.97%, 96.71%, 98.08%, 98.75% and 99.01%, respectively,
of our total income. In addition to our Gold Loans business, we provide
money transfer services through our branches as sub-agents of various
registered money transfer agencies, and recently have commenced
providing collection agency services. We also operate three windmills in
the state of Tamil Nadu.
We issue secured non-convertible debentures called "Muthoot Gold
Bonds" on a private placement basis. Proceeds from our issuance of
Muthoot Gold Bonds form a significant source of funds for our Gold
Loan business. We also rely on bank loans and subordinated debt
instruments as our sources of funds. As per our audited financial
statements as of September 30, 2011 we had Rs. 50,415 million in
outstanding Muthoot Gold Bonds and Rs.122,152 million in other
borrowings. We also raise capital by selling a portion of our loan
receivables under bilateral assignment agreements with various banks.
We also raise capital by issuing commercial paper and listed & credit
rated non-convertible debentures under private placement mode to
various institutional investors.
Our customers are typically small businessmen, vendors, traders,
farmers and salaried individuals, who for reasons of convenience,
accessibility or necessity, avail of our credit facilities by pledging their
gold jewellery with us rather than by taking loans from banks and other
financial institutions. We provide retail loan products, primarily
comprising Gold Loans. We also disburse other loans, including those
secured by Muthoot Gold Bonds.Our Gold Loans have a maximum 12
month term. As per our audited financial statements, our average
disbursed Gold Loan amount outstanding was Rs. 37,765 per loan
account as of September 30, 2011. For the period ended September 30,
2011, our retail loan portfolio earned, on average, 1.82% per month, or
21.87% per annum.
As per our audited financial statements, as of March 31, 2008, 2009,
2010, 2011 and as of September 30, 2011, our portfolio of outstanding
gross Gold Loans under management was Rs. 21,790.1 million, Rs.
33,000.7 million, Rs. 73,417.3 million, Rs.157,280.7 million and Rs.
207,666.2 million, respectively, and approximately 30.1 tons, 38.9 tons,
65.5 tons, 112.0 tons and 129.5 tons, respectively, of gold jewellery was
various institutional investors.
Our customers are typically small businessmen, vendors, traders,
farmers and salaried individuals, who for reasons of convenience,
accessibility or necessity, avail of our credit facilities by pledging their
gold jewellery with us rather than by taking loans from banks and other
financial institutions. We provide retail loan products, primarily
comprising Gold Loans. We also disburse other loans, including those
secured by Muthoot Gold Bonds.Our Gold Loans have a maximum 12
month term. As per our audited financial statements, our average
disbursed Gold Loan amount outstanding was Rs. 37,765 per loan
account as of September 30, 2011. For the period ended September 30,
2011, our retail loan portfolio earned, on average, 1.82% per month, or
21.87% per annum.
As per our audited financial statements, as of March 31, 2008, 2009,
2010, 2011 and as of September 30, 2011, our portfolio of outstanding
gross Gold Loans under management was Rs. 21,790.1 million, Rs.
33,000.7 million, Rs. 73,417.3 million, Rs.157,280.7 million and Rs.
207,666.2 million, respectively, and approximately 30.1 tons, 38.9 tons,
65.5 tons, 112.0 tons and 129.5 tons, respectively, of gold jewellery was
held by us as security for our Gold Loans. Gross non-performing assets
("NPAs") were at 0.42%, 0.48%, 0.46%, 0.29% and 0.59% of our gross
retail loan portfolio under management as of March 31, 2008, 2009,
2010, 2011 and as of September 30, 2011 respectively.
As per our audited financial statements, in the years ended March 31,
2008, 2009, 2010 and 2011, our total income was Rs. 3,686.4 million,
Rs. 6,204.0 million, Rs. 10,893.8 million, and Rs. 23,158.7 million,
respectively, demonstrating an annual growth rate of 57.56%, 68.29%,
75.59% and 112.59%, respectively. As per our audited financial
statements, in the six months ended September 30, 2011, our total
income was Rs. 20,245.4 million.As per our audited financial statements
in the years ended March 31, 2008, 2009, 2010 and 2011our profit after
tax was Rs. 630.6 million, Rs. 978.7 million, Rs. 2,285.2 million and Rs.
4,941.8 million, respectively, demonstrating an annual growth rate of
43.80%, 55.20%, 133.49% and 116.25%, respectively. As per our
audited financial statements, our profit after tax in the six months
ended September 30, 2011 was Rs. 4,060.06 million.As per our audited
financial statements as of March 31, 2008, 2009, 2010, 2011 and
September 30, 2011, our networth was Rs. 2,131.1 million, Rs. 3,614.5
million, Rs. 5,841.9 million, Rs. 13,341.9 million, and Rs. 26,120.3
million respectively.
("NPAs") were at 0.42%, 0.48%, 0.46%, 0.29% and 0.59% of our gross
retail loan portfolio under management as of March 31, 2008, 2009,
2010, 2011 and as of September 30, 2011 respectively.
As per our audited financial statements, in the years ended March 31,
2008, 2009, 2010 and 2011, our total income was Rs. 3,686.4 million,
Rs. 6,204.0 million, Rs. 10,893.8 million, and Rs. 23,158.7 million,
respectively, demonstrating an annual growth rate of 57.56%, 68.29%,
75.59% and 112.59%, respectively. As per our audited financial
statements, in the six months ended September 30, 2011, our total
income was Rs. 20,245.4 million.As per our audited financial statements
in the years ended March 31, 2008, 2009, 2010 and 2011our profit after
tax was Rs. 630.6 million, Rs. 978.7 million, Rs. 2,285.2 million and Rs.
4,941.8 million, respectively, demonstrating an annual growth rate of
43.80%, 55.20%, 133.49% and 116.25%, respectively. As per our
audited financial statements, our profit after tax in the six months
ended September 30, 2011 was Rs. 4,060.06 million.As per our audited
financial statements as of March 31, 2008, 2009, 2010, 2011 and
September 30, 2011, our networth was Rs. 2,131.1 million, Rs. 3,614.5
million, Rs. 5,841.9 million, Rs. 13,341.9 million, and Rs. 26,120.3
million respectively.
Our Strength
We believe that the following competitive strengths position us well for
continued growth:
Market leading position in the Gold Loan business with a strong
presence in under-served rural and semi-urban markets
Gold loans are the core products in our asset portfolio. We believe that
our experience, through our Promoters, has enabled us to have a
leading position in the Gold Loan business in India. Highlights of our
market leading position include the following:
We are the largest gold financing company in India in terms of
loan portfolio, according to the IMaCS Industry Report, (2010
Update). As per our audited financial statements, our loan
portfolio as of September 30, 2011 comprised approximately 5.5
million loan accounts, in India with Gold Loans outstanding of Rs.
207,666.2 million.
We have the largest branch network among gold loan NBFCs,
according to the IMaCS Industry Report (2010 update). As of
September 30, 2011, we operated 3,274 branches across 20
states, the national capital territory of Delhi, and four union
territories in India. Our branch network has expanded significantly
in recent years from 373 branches as of March 31, 2005 to 3,274
We believe that the following competitive strengths position us well for
continued growth:
Market leading position in the Gold Loan business with a strong
presence in under-served rural and semi-urban markets
Gold loans are the core products in our asset portfolio. We believe that
our experience, through our Promoters, has enabled us to have a
leading position in the Gold Loan business in India. Highlights of our
market leading position include the following:
We are the largest gold financing company in India in terms of
loan portfolio, according to the IMaCS Industry Report, (2010
Update). As per our audited financial statements, our loan
portfolio as of September 30, 2011 comprised approximately 5.5
million loan accounts, in India with Gold Loans outstanding of Rs.
207,666.2 million.
We have the largest branch network among gold loan NBFCs,
according to the IMaCS Industry Report (2010 update). As of
September 30, 2011, we operated 3,274 branches across 20
states, the national capital territory of Delhi, and four union
territories in India. Our branch network has expanded significantly
in recent years from 373 branches as of March 31, 2005 to 3,274
branches as of September 30, 2011, comprising 589 branches in
northern India, 2,114 branches in southern India, 422 branches in
western India and 149 branches in eastern India covering 20
states, the national capital territory of Delhi and four union
territories in India.
We believe that due to our early entry we have built a
recognizable brand in the rural and semi-urban markets of India,
particularly in the southern Indian states of Tamil Nadu, Kerala,
Andhra Pradesh and Karnataka. As of September 30, 2011, the
southern Indian states of Tamil Nadu, Kerala, Andhra Pradesh,
Karnataka, and the Union Territory of Pondicherry constituted
71% of our total Gold Loan portfolio.
We have a strong presence in under-served rural and semi-urban
markets. A large portion of the rural population has limited access
to credit either because of their inability to meet the eligibility
requirements of banks and financial institutions because credit is
not available in a timely manner, or at all. We have positioned
ourselves to provide loans targeted at this market.
We offer products with varying loan amounts, advance rates (per
gram of gold) and interest rates. The principal loan amounts we
disburse usually range from Rs. 2,000.0 to Rs. 200,000.0 while
northern India, 2,114 branches in southern India, 422 branches in
western India and 149 branches in eastern India covering 20
states, the national capital territory of Delhi and four union
territories in India.
We believe that due to our early entry we have built a
recognizable brand in the rural and semi-urban markets of India,
particularly in the southern Indian states of Tamil Nadu, Kerala,
Andhra Pradesh and Karnataka. As of September 30, 2011, the
southern Indian states of Tamil Nadu, Kerala, Andhra Pradesh,
Karnataka, and the Union Territory of Pondicherry constituted
71% of our total Gold Loan portfolio.
We have a strong presence in under-served rural and semi-urban
markets. A large portion of the rural population has limited access
to credit either because of their inability to meet the eligibility
requirements of banks and financial institutions because credit is
not available in a timely manner, or at all. We have positioned
ourselves to provide loans targeted at this market.
We offer products with varying loan amounts, advance rates (per
gram of gold) and interest rates. The principal loan amounts we
disburse usually range from Rs. 2,000.0 to Rs. 200,000.0 while
interest rates on our Gold Loans usually range between 12.00%
and 26.00% per annum..
and 26.00% per annum..
Strengths
Here we will analyze the strengths of the MUTHOOT FINANCE
as a whole. The most important factors are:
Technology is advanced and easy to implement: For MUTHOOT
FINANCE is really advanced and more and more investment is
done on technology to get world class infrastructure and know-
how to put in this field. Recently the MUTHOOT FINANCE is
going to add 3G spectrum as its latest up gradation.
Management Team has prior experience: The management
team controlling Indian telecom sector in really efficient. Thank
goes to the IITs which produce world class engineers. So Indian
telecom sector has abundance of technological know how.
Here we will analyze the strengths of the MUTHOOT FINANCE
as a whole. The most important factors are:
Technology is advanced and easy to implement: For MUTHOOT
FINANCE is really advanced and more and more investment is
done on technology to get world class infrastructure and know-
how to put in this field. Recently the MUTHOOT FINANCE is
going to add 3G spectrum as its latest up gradation.
Management Team has prior experience: The management
team controlling Indian telecom sector in really efficient. Thank
goes to the IITs which produce world class engineers. So Indian
telecom sector has abundance of technological know how.
Weakness
The weaknesses of the MUTHOOT FINANCE are as follows.
High Cost of Infrastructure: The infrastructure cost of telecom
industry is very high.
Low customer retention power: The customer retention power
for telecom industry is really low and the customer changes their
service provider company very soon.
The weaknesses of the MUTHOOT FINANCE are as follows.
High Cost of Infrastructure: The infrastructure cost of telecom
industry is very high.
Low customer retention power: The customer retention power
for telecom industry is really low and the customer changes their
service provider company very soon.
Opportunity
Population: The population of India is really an opportunity of
telecom service providers, as the number of population without
telecom service is also very high. The industry has to target
India’s huge population to grow.
Changing Population psychograph: Population psychograph
is also changing. Previously telecom service was thought as an
emergency service, now it has become an essential part of life in
our country.
Increased Penetration Level: All the organizations of the
industry are trying to increase their penetration level, in other
word to increase the tele-density of the country. The urban Indian
population gives a real growth prospect to the industry.
FDI: The foreign direct investment in telecom has been hiked up
from 49% to 74%. This move is positive for the sector, as it
requires investments of Rs 700 – 900 million over the next 5
Population: The population of India is really an opportunity of
telecom service providers, as the number of population without
telecom service is also very high. The industry has to target
India’s huge population to grow.
Changing Population psychograph: Population psychograph
is also changing. Previously telecom service was thought as an
emergency service, now it has become an essential part of life in
our country.
Increased Penetration Level: All the organizations of the
industry are trying to increase their penetration level, in other
word to increase the tele-density of the country. The urban Indian
population gives a real growth prospect to the industry.
FDI: The foreign direct investment in telecom has been hiked up
from 49% to 74%. This move is positive for the sector, as it
requires investments of Rs 700 – 900 million over the next 5
years. FDI inflow by 2004 was 9950.94 cores in telecom.
Countries like Europe, Korea, and Japan telecom are likely to
enter India, as India is seen as fastest growing telecom market in
world.
Threats
The treats to the MUTHOOT FINANCE are the following:
Government Policies – Government may provide licenses to
many foreign operators, which may already have pose a threat for
the existing players in the industry.
New Technology can change the market dynamics: A lot of new
technologies are coming. Then even have the potential of
changing the entire industry dynamics or even create substitute of
the telecom services existing. Some of the examples are follows:
. VOIP (Skype, Messenger etc.)
Countries like Europe, Korea, and Japan telecom are likely to
enter India, as India is seen as fastest growing telecom market in
world.
Threats
The treats to the MUTHOOT FINANCE are the following:
Government Policies – Government may provide licenses to
many foreign operators, which may already have pose a threat for
the existing players in the industry.
New Technology can change the market dynamics: A lot of new
technologies are coming. Then even have the potential of
changing the entire industry dynamics or even create substitute of
the telecom services existing. Some of the examples are follows:
. VOIP (Skype, Messenger etc.)
. Online Chat
. Email
. Satellite phones to summarize the SWAT analysis we can draw
the following framework for telecom industry:
. Satellite phones to summarize the SWAT analysis we can draw
the following framework for telecom industry:
Objective of study are:
Will I get any tax benefit if I invest in these NCDs?
No, these NCDs do not entitle you to any tax benefit nor are these any
"infrastructure bonds", which make you eligible for an additional tax
deduction under section 80 CCF.
Is interest on these NCDs Tax Free?
No, the interest on these NCDs is not tax free - it is chargeable to tax.
The interest income will be taxed under "income from other sources",
and will be brought to tax at the respective income tax rates you fall
under. However no tax will be deducted at source as these NCDs are
issued in demat form and are listed on the exchange.
What is the Tax Treatment on Capital Gains for these NCDs?
If you happen to sell these NCDs before 365 days, you will have to pay
short term capital gain tax (@ applicable to you as per your tax slab)
arising on the profit. Provisions of long term capital gain tax will be
applicable for any sale of securities after 365 days. Any long term
capital gain on these securities will be taxable @ 10% without
indexation benefits or 20% with indexation benefits.
Will I get any tax benefit if I invest in these NCDs?
No, these NCDs do not entitle you to any tax benefit nor are these any
"infrastructure bonds", which make you eligible for an additional tax
deduction under section 80 CCF.
Is interest on these NCDs Tax Free?
No, the interest on these NCDs is not tax free - it is chargeable to tax.
The interest income will be taxed under "income from other sources",
and will be brought to tax at the respective income tax rates you fall
under. However no tax will be deducted at source as these NCDs are
issued in demat form and are listed on the exchange.
What is the Tax Treatment on Capital Gains for these NCDs?
If you happen to sell these NCDs before 365 days, you will have to pay
short term capital gain tax (@ applicable to you as per your tax slab)
arising on the profit. Provisions of long term capital gain tax will be
applicable for any sale of securities after 365 days. Any long term
capital gain on these securities will be taxable @ 10% without
indexation benefits or 20% with indexation benefits.
Can a minor apply to these NCDs?
Yes, a minor can apply for these NCDs, but only and only through a
guardian.
Can one apply in joint names?
Yes, one may apply in a joint name. However, the demat account will
also be required to be held in joint name and the order of applicant shall
be the same as appearing in the demat account. Moreover, all payments
will be made out in favour of the first applicant as well as all
communications will be addressed to the first named applicant whose
name appears in the application form and at the address mentioned
therein.
Who will get the interest in case of joint application?
In case of joint application, interest will be accounted to the first holder
only.
My demat account is in joint name, but I want to apply is a single
name?
In case of a single application, demat account of the same single
applicant would be necessary. Joint demat account would not do.
Yes, a minor can apply for these NCDs, but only and only through a
guardian.
Can one apply in joint names?
Yes, one may apply in a joint name. However, the demat account will
also be required to be held in joint name and the order of applicant shall
be the same as appearing in the demat account. Moreover, all payments
will be made out in favour of the first applicant as well as all
communications will be addressed to the first named applicant whose
name appears in the application form and at the address mentioned
therein.
Who will get the interest in case of joint application?
In case of joint application, interest will be accounted to the first holder
only.
My demat account is in joint name, but I want to apply is a single
name?
In case of a single application, demat account of the same single
applicant would be necessary. Joint demat account would not do.
If I’m an NRI can I invest in these NCDs?
No, NRIs are not eligible to invest in these NCDs.
Is there a lock-in period while investing?
No. There is no lock-in period for these NCDs. In terms of providing
liquidity, these NCDs are proposed to be listed on the National Stock
Exchange and the Bombay Stock Exchange.
In whose favour the cheque is to be made?
Cheques/Drafts have to be made in the favour of "Escrow Account
Muthoot Finance NCD- Public Issue" and crossed "A/C PAYEE ONLY"
"
No, NRIs are not eligible to invest in these NCDs.
Is there a lock-in period while investing?
No. There is no lock-in period for these NCDs. In terms of providing
liquidity, these NCDs are proposed to be listed on the National Stock
Exchange and the Bombay Stock Exchange.
In whose favour the cheque is to be made?
Cheques/Drafts have to be made in the favour of "Escrow Account
Muthoot Finance NCD- Public Issue" and crossed "A/C PAYEE ONLY"
"
RESEARCH METHODOLOGY
Definition of Research
The word research is derived from the Latin word meaning to
know. It is a systematic and a replicable process, which identifies
and defines problems, within specified boundaries. It employs
well-designed method to collect the data and analyses the results.
It disseminates the findings to contribute to generalize able
knowledge. The characteristics of research presented below will
be examined in greater details later are:
Systematic problem solving which identifies variables and tests
relationships between them,
Collecting, organizing and evaluating data.
Logical, so procedures can be duplicated or understood by
others
Empirical, so decisions are based on data collected
Reductive, so it investigates a small sample which can be
generalized to a larger population
Replicable, so others may test the findings by repeating it.
Definition of Research
The word research is derived from the Latin word meaning to
know. It is a systematic and a replicable process, which identifies
and defines problems, within specified boundaries. It employs
well-designed method to collect the data and analyses the results.
It disseminates the findings to contribute to generalize able
knowledge. The characteristics of research presented below will
be examined in greater details later are:
Systematic problem solving which identifies variables and tests
relationships between them,
Collecting, organizing and evaluating data.
Logical, so procedures can be duplicated or understood by
others
Empirical, so decisions are based on data collected
Reductive, so it investigates a small sample which can be
generalized to a larger population
Replicable, so others may test the findings by repeating it.
Discovering new facts or verify and test old facts.
Developing new scientific tools, concepts and theories, which
would facilitate to take decision. For the proper analysis of data
simple statistical techniques such as percentage were use. It
helps in making more generalization from the data available. The
data which was collected from a sample of population was
assumed to be representing entire population was interest.
Demographic factors like age, income and educational
background was used for the classification purpose.
Sample size
For carrying out any research or study on any subject it is very
difficult to cover even 10% of the total population. Therefore the
sample size has to be decided for a meaningful conclusion. For
designing the sample size, it was thought proper to cover a very
small percentage of population in various age groups.
The method used for sample technique was non probability
convenience sampling method. This method is used because it is
known previously as to whether a particular person will be asked
to fill the questionnaire. Convenient sampling is used because
Developing new scientific tools, concepts and theories, which
would facilitate to take decision. For the proper analysis of data
simple statistical techniques such as percentage were use. It
helps in making more generalization from the data available. The
data which was collected from a sample of population was
assumed to be representing entire population was interest.
Demographic factors like age, income and educational
background was used for the classification purpose.
Sample size
For carrying out any research or study on any subject it is very
difficult to cover even 10% of the total population. Therefore the
sample size has to be decided for a meaningful conclusion. For
designing the sample size, it was thought proper to cover a very
small percentage of population in various age groups.
The method used for sample technique was non probability
convenience sampling method. This method is used because it is
known previously as to whether a particular person will be asked
to fill the questionnaire. Convenient sampling is used because
only those people will be asked to fill the questionnaires that were
easily accessible and available to the researcher. Considering the
constraints, it was decided to conduct the study based on sample
size of 50 retailers in specific
Area. Scientific method is not adopted in this study because of
financial constraints and also because of lack of time; also the
basic aim of doing the research is academic; hence most
convenient way is selected.
TYPES & TECHNIQUES
The study conducted is a conclusive descriptive statistical study;
the researcher comes to the decision which is precise and
rational. The study is conclusive because after doing the study the
researcher comes to a conclusion regarding the position of the
brand in the minds of respondents of different firms groups. The
study is statistical because throughout the study all the similar
samples are selected and group together. All the similar
responses are taken together as one and their percentages are
calculated. Thus, this, conclusive descriptive statistical study is
easily accessible and available to the researcher. Considering the
constraints, it was decided to conduct the study based on sample
size of 50 retailers in specific
Area. Scientific method is not adopted in this study because of
financial constraints and also because of lack of time; also the
basic aim of doing the research is academic; hence most
convenient way is selected.
TYPES & TECHNIQUES
The study conducted is a conclusive descriptive statistical study;
the researcher comes to the decision which is precise and
rational. The study is conclusive because after doing the study the
researcher comes to a conclusion regarding the position of the
brand in the minds of respondents of different firms groups. The
study is statistical because throughout the study all the similar
samples are selected and group together. All the similar
responses are taken together as one and their percentages are
calculated. Thus, this, conclusive descriptive statistical study is
the best study for this purpose as it provides the necessary
information which is utilize to arrive at a concrete decision.
TOOLS USED
To know the response I have used the questionnaire method in
sample survey. If one wishes to find what people think or know,
the logical procedure is to ask them. This has lead marketing
researchers to use the questionnaire technique for collecting data
more than any other method. In this method questionnaire were
distributed to the respondents and they were asked to answer the
questions in the questionnaire. The questionnaires were
structured no disguised Questionnaire because the questions,
which the questionnaire contained, were arranged in a specific
order besides every question asked were logical for the study, no
question can be termed as irrelevant. The questionnaire, were
non-disguised because the questionnaire were constructed so
that the objective is clear to the respondent. The respondents
were aware of the objective. They knew why they asked to fill the
questionnaire.
LIMITATIONS OF THE STUDY
information which is utilize to arrive at a concrete decision.
TOOLS USED
To know the response I have used the questionnaire method in
sample survey. If one wishes to find what people think or know,
the logical procedure is to ask them. This has lead marketing
researchers to use the questionnaire technique for collecting data
more than any other method. In this method questionnaire were
distributed to the respondents and they were asked to answer the
questions in the questionnaire. The questionnaires were
structured no disguised Questionnaire because the questions,
which the questionnaire contained, were arranged in a specific
order besides every question asked were logical for the study, no
question can be termed as irrelevant. The questionnaire, were
non-disguised because the questionnaire were constructed so
that the objective is clear to the respondent. The respondents
were aware of the objective. They knew why they asked to fill the
questionnaire.
LIMITATIONS OF THE STUDY
The research will be conducted in a limited area.
The internet information can be irrelevant.
Time will be a major constraint.
The respondent will be limited so cannot be treated as a whole
population.
The respondent may be biased.
Due to language problem it is possible that the respondents are
not be able to
Understand the questionnaire and can cause misleading
results.
The internet information can be irrelevant.
Time will be a major constraint.
The respondent will be limited so cannot be treated as a whole
population.
The respondent may be biased.
Due to language problem it is possible that the respondents are
not be able to
Understand the questionnaire and can cause misleading
results.
FINDING :-
At the question of my survey I asked with respondent that are they
satisfied with MUTHOOT FINANCE than most of the respondent
response me that the demand of Muthoot Finance in the market is
very low and there is major problem of network so the customer are
not willing to buy Muthoot Finance.
RECOMMENDATION :-
By the about explanation I am able to say that our product and
services has unique feature and the users of our services are satisfied
with services so I can say there is no any flaw in our services .We
have only to promotion our product for much sale and we have to
make new market strategy.
At the question of my survey I asked with respondent that are they
satisfied with MUTHOOT FINANCE than most of the respondent
response me that the demand of Muthoot Finance in the market is
very low and there is major problem of network so the customer are
not willing to buy Muthoot Finance.
RECOMMENDATION :-
By the about explanation I am able to say that our product and
services has unique feature and the users of our services are satisfied
with services so I can say there is no any flaw in our services .We
have only to promotion our product for much sale and we have to
make new market strategy.
Conclusions
By above survey report I found many facts which are affecting the
present scene of Muthoot Finance .And many things are present
which will help us to increase sale of our product and service. By using
these things we can improve our service and increase our sell. People
knew about our product by name but they do not know essential
features of our product by which they visit the shop for our product or
services.
So we have to make much promotional activities and we have to
make mass campaign for making people aware with our product and
services. By this way we become able to create a picture in mind of
common people by which they will move on Muthoot Finance. And
By above survey report I found many facts which are affecting the
present scene of Muthoot Finance .And many things are present
which will help us to increase sale of our product and service. By using
these things we can improve our service and increase our sell. People
knew about our product by name but they do not know essential
features of our product by which they visit the shop for our product or
services.
So we have to make much promotional activities and we have to
make mass campaign for making people aware with our product and
services. By this way we become able to create a picture in mind of
common people by which they will move on Muthoot Finance. And
only this is a way to make a new and large market for Muthoot
Finance.
I hope the honorable and responsible person of the company will
must take interest to solve the problems coming in progress of
Muthoot Finance, what I have indicated in my project.
Finance.
I hope the honorable and responsible person of the company will
must take interest to solve the problems coming in progress of
Muthoot Finance, what I have indicated in my project.
Bibliography
Internet
WEB SITE www.google.com
Homework Help
https://www.homeworkping.com/
Math homework help
https://www.homeworkping.com/
Research Paper help
https://www.homeworkping.com/
Algebra Help
https://www.homeworkping.com/
Calculus Help
Internet
WEB SITE www.google.com
Homework Help
https://www.homeworkping.com/
Math homework help
https://www.homeworkping.com/
Research Paper help
https://www.homeworkping.com/
Algebra Help
https://www.homeworkping.com/
Calculus Help
https://www.homeworkping.com/
Accounting help
https://www.homeworkping.com/
Paper Help
https://www.homeworkping.com/
Writing Help
https://www.homeworkping.com/
Online Tutor
https://www.homeworkping.com/
Online Tutoring
https://www.homeworkping.com/
Accounting help
https://www.homeworkping.com/
Paper Help
https://www.homeworkping.com/
Writing Help
https://www.homeworkping.com/
Online Tutor
https://www.homeworkping.com/
Online Tutoring
https://www.homeworkping.com/
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