Muthoot Finance hike in interest rates on gold loans up

as 24-25 per cent. “Yield on the loans we give has been at around 19 per cent in last three years. But in last six months,banks have increased their lending rates so our cost of borrowings has also gone up,so we have increased our rates from 19.7 per cent to 21.6,” he said.

“But this 21.6 per cent average is still the lowest offered by a NBFC in gold financing,” he claimed. “The company as on on Wednesday has assets under management to the tune of Rs 19,000 crore including 2,090 crore worth assets added in the first quarter ended June of this fiscal. We expect a similar trend on asset side additions to continue in coming quarters,” Muthoot said.

“On the liability side the company has bank loan of Rs 7,200 crore,in addition to Rs 2,399 crore by way of bilateral agreements from them,retail NCDs of Rs 4,400 crore through private placement,and unsecured commercial paper of Rs 1,171 crore,” he said. “Muthoot’s gold holdings have risen steadily from 15 MT in 2005 to 210 MT as of on Wednesday in the strong rooms of our 3,100 branches across India,” he said.

According to the company,the gold loan industry has high growth potential and offers huge untapped opportunity. India annually imports around 600-700 MT of gold annually of which around 95 per cent is sold as jewellery. “We estimate that there is 18,000 tonnes of gold in the country and the total organised business is of around 800 to 900 tonnes only,which shows how much potential is there,” Muthoot said.

“The per branch gold loaning business of the company has touched to Rs 5.9 crore on Wednesday,from Rs 1.7 crore in March,” he said.

The company plans to raise Rs 1,000 crore through its maiden public issue of listed redeemable non-convertible debentures (NCDs),of face value of Rs 1,000 each aggregating to Rs 500 crore.

“The company by way of green shoe has option to retain over subscription of another Rs 500 crore,” Muthoot said. “The object of our maiden listed redeemable NCD public issue is to diversify the bouquet of company liability,” he said.

The NCD issue with three investment options and effective yield of up to 12.25 per cent per annum opens on August 23 and closes on September 5,2011.

The NCD proceeds shall be used by company for various financing activities,including lending and investments,to repay existing liabilities or loans and towards business operations including for capital expenditure and working capital requirements.

The company in May this year had raised close to Rs 900 crore through an Initial Public Offering (IPO). The promoters holding in the company had come down to 80 per cent post the IPO.

“Seven per cent of equity was placed with a private equity pre-IPO,while 13 per cent stakeholding was diluted through the IPO,” Muthoot said. The company offers 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,to meet short-term liquidity requirements.