Muthoot Finance IPO: Experts divided on the issue

Country's largest gold financing company Muthoot Finance's initial public offering, which closes today, has received good response from investors, especially qualified institutional buyers.

In an interview with CNBC-TV18, SP Tulsian, sptulsian.com and PN Vijay, Portfolio Manager, speak about the issue. Also read: Muthoot Finance to outpace industry growth, says P Lilladher Below is the transcript of their interview with Latha Venkatesh and Anuj Singhal of CNBC-TV18. Also watch the accompanying videos. Q: The biggest worry for me, when one reads the risk factors, is that the Muthoot family is actually asking for royalties of 1%. More than that, there is bunch of litigation. Tulsian: I agree with that. Apart from that, there are two more additions to the concerns. First is the 10% discount, which has been stated on the RHP. When the retail investors are enquiring what discount the company is offering, we have to say that no discount is being given. When you talk to the management, they say that the BRLM have advised them not to do so, while BRLM say nothing has been advised like that. Second, royalty payment, I agree that the company has stated that 1% of the sales or 3% of the profit before tax can be given as the royalty to the promoters. Though the management says that they have not acted upon that, this is a great concerns, which remains in the minds of the retail shareholder specifically. If you recall, the Gujarat government had passed an enabling resolution that 30% of the PBT of their five listed companies will be asked to contribute for the social objective. All the five stocks, GNFC, GSFC, GIPCL, Gujarat Alkalies, had all taken a beating at that time. Probably similar things can happen. On the contrary, non-clarity on, that whether the promoters will be acting upon that or not, creates more confusion. Third, about the litigation, the promoters maybe couple of weeks back had very categorically said that all the litigations have been covered and then you see subsequently the corrigenda coming. I won