Muthoot Finance plans to raise Rs 500cr via NCDs issue

Muthoot Finance's non-convertible debentures (NCDs) issue will open on September 17, 2012.

In an interview to CNBC-TV18, Oommen Mammen, chief financial officer of Muthoot Finance says the issue is for Rs 250 crore with an option to retain oversubscription for another Rs 250 crore. "We are planning to raise Rs 500 crore," he adds. Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Q: Can you give us the main characteristics of your debenture issue? Is it meant towards your tier-II capital, are they secured debentures? How do they compare in terms of annual yield? A: The issue is for Rs 250 crore with an option to retain oversubscription for another Rs 250 crore. We are planning to raise Rs 500 crore. It is a secured instrument. This doesn’t come under the tier-II category. We are offering five options to investors; a two-year instrument at 11.5%, a three-year instrument at 11.75%, a five-year instrument with a monthly option targeting retail investors, pensioners with a coupon of 11.75% monthly, and annual instrument of five years at 12% and another scheme with cumulative option for six years. Q: How much will the six-year cumulative option yield annually? A: Annually 12.25%. Since we are looking at more and more retail participation, we have issue under physical mode also. Q: What exactly your liability mix would look like for the company now? A: Forty percent of our liability will come from bank sources, 30% is from NCDs and 10-15% will be the other CPs, remaining portion of the securitised portfolio and the rest will be the networth. Q: We have seen gold prices increase to record highs in rupee terms. How exactly your loan book would grow? What sort of estimates are you working with now? A: In the first quarter of the current year, we de-grew by about 5%. This quarter we will see more of a flat growth. Because of the regulatory uncertainties, we thought we will treat this year as more of a consolidation phase. We are looking forward to getting some amount of comfort from the regulator as well as market participants, so that we can take our growth path again further. _PAGEBREAK_ Q: What will be your assets under management (AUM)? A: AUM, in March, was around Rs 24,400 crore. In June, it was Rs 23,300 crore. So, it will remain more or less at the same level by the end of this quarter. Q: You are getting about equal amount of money through debentures as you have in terms of borrowings from banks now. Will your liabilities from debentures exceed that from banks, is that your strategy? A: Basically, for an NBFC, there are limited avenues for fund raising, either it has to be bank sources or through NCDs. Q: What we heard from banking circles is that they have more or less reached more exposure limits to NBFCs and therefore further funds from the banking sector maybe tough for you guys. You are, therefore, forced to go to debentures. Is that the case? A: I am not aware of the exact numbers. But generally the borrowings from banks are divested among the various banks. We have currently about 30 banks. So, we do not expect 50% or 100% increase in our exposure from central bank. Q: What you are saying is you have not hit the limit in terms of bank finance, it is still available? A: Yes, the possibility of further enhancement is still there. Q: What are you paying for money that you raised from CPs? Are you witnessing a fall in the yields? Is money becoming a little easier because the regulator has put in so much and therefore there is greater comfort with NBFCs? A: Ofcourse when the regulations came, there was some sort of a panic among the institution versus mutual fund houses on the investing in our debt instruments. But what I have seen is that gradually that comfort is coming among investors. We are getting a lot of loan calls on placement of CPs.