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ICRA Upgrades Long Term Debit Rating of Muthoot Finance Ltd

In Business
March 17, 2021

ICRA has upgraded its ratings on the long-term debt facilities of Muthoot Finance Limited to ‘[ICRA] AA+ (Stable)’ from ‘[ICRA] AA (Stable)’. The rating upgrade signifies reaching the highest standing in the category and this rating is just one level below ‘AAA’ rating which is the highest rating for long term debt instruments. The rating denotes ‘high safety’ regarding timely servicing of financial obligations and such instruments carry very low credit risk.

This rating upgrade will enable the Company to raise more long term debt funds as well as attract wider set of investors. This upgrade can further attract investments from Retail Investors in the public Issue of NCDs in which company has track record of 24 issuances raising Rs. 17392 crore cumulatively. Moreover, the company will be able to raise funds at much more competitive rates.

George Alexander Muthoot, Managing Director, on this occasion, stated “With this rating upgrade from ICRA, Muthoot Finance Ltd. has crossed a major milestone of AA+ credit rating from two rating agencies, earlier being from CRISIL. It is a recognition of its market leadership position in gold loan industry as well as its robust financial standing. We wish to highlight that the achievement of this rating level for Muthoot Finance Ltd. is on standalone basis without any parental support factored in this rating. We continue steadfast in the mission of making Indians Atmanirbhar and supporting financial needs of every individual as well as MSMEs.”

ICRA in its rating rationale has stated that “The rating upgrade factors in the sustained healthy financial performance of Muthoot Finance Limited (MFL) along with the scale-up in the overall portfolio which was largely led by the gold loans business. MFL’s gold loan book has more than doubled over the last 5 years to Rs. 49,622 crore as in December 2020 and accounted for about 90% of its overall consolidated portfolio. The credit costs in the gold loan business have been under control, which uplifts the consolidated earnings performance. ICRA expects the consolidated earnings performance to remain healthy as gold loans would account for about 85-90% of the overall lending portfolio. MFL’s capitalisation profile characterised by a consolidated managed gearing of about 3.5 times as of December 2020 is also expected to remain comfortable over the medium-term supported by its expected healthy accruals.”

The rating rationale also stated that “The ratings continue to factor in MFL’s long track record and its leadership position in the gold loan segment, its established franchise with a pan-India branch network, and its efficient internal controls and monitoring systems. MFL’s ability to raise funds from diverse sources, current on-balance sheet liquidity and short-term nature of the loans results in strong liquidity profile.”