Mumbai, August 17, 2016: ICRA has upgraded long term debt rating of Muthoot Finance from “AA-/STABLE“ TO “AA/STABLE”. Long term debt rating covers debt instruments of above one year. Short term debt rating covers debt instruments of upto one year.
Under ICRA rating scale, “AA” rating carries a meaning “Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.” ICRA may apply ‘+’ (plus) or ‘-‘ (minus) sign to this rating to indicate their relative position within the category.
By this upgrade, the definition of ICRA rated long term debt instruments will change from “AA-“ to “AA” which indicates positive change in comparative standing within ‘AA’ rated category.
Mr. George Alexander Muthoot, MD, Muthoot Finance Ltd said “The rating upgrade is a reflection of consistent performance inspite of going through turbulent times in the last four years as well as improvement in financial performance last year. This upgrade is a recognition of the efforts of ‘Team Muthoot’. We believe that under AA category, we enter a different league of credit rated companies. We hope this upgrade will enable us to get finer rates from financial institutions and banks enabling us to reduce our cost of borrowings.”
Under short term debt rating, Muthoot Finance already has highest rating under that category from ICRA with “A1+” rating which carries a meaning “Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk”
ICRA in its rating rationale has stated “The revision in the long-term rating factors in MFL’s initiatives to improve its credit risk profile by tightening interest collections (regular interest collections vis-a-vis bullet collections in the past), which is likely to offset the risks on account of gold volatility to an extent. The ratings continue to factor in the company’s track record in the gold loan business with its leadership position in the market, its established franchise with network of 4,294 branches (as on June 30, 2016) across the country, efficient internal controls and audit systems, ability to raise funds via public issue of NCDs, comfortable capitalisation (gearing of 3.7 times as on March 31, 2016) and liquidity profile, and healthy profitability indicators (RoA of 3.0% in FY2016).”
About Muthoot Finance Ltd:
Muthoot Finance Limited is the largest gold financing company in India in terms of loan portfolio. The company is a “Systemically Important Non-deposit taking NBFC” head quartered in the southern Indian state of Kerala. Operating history of Muthoot Finance has evolved over a period of 76 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.
The company provides personal and business loans secured by gold jewellery. Gold Loans are primarily given 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. The company is listed on both National Stock Exchange and Bombay Stock Exchange.