Will use IPO proceeds to maintain over 15% CAR: Muthoot Fin

Muthoot Finance, the non-banking finance company engaged in gold loan business, plans to raise Rs 901 crore via an initial public offer of  5.15 crore equity shares in the price band of Rs 160-175. "The purpose of the fund raising is to maintain our aims to attain a capital adequacy ratio (CAR) above 15%," said George Alexander Muthoot, MD, Muthoot Finance. The company's current CAR stands at 14.79%.

"We had a gold loan book of Rs 13,000 crore as on November 2011. We want to grow our loan book by another Rs 10,000 crore in the next one year. The proceeds will too be utilized to expand our lending further."

The Reserve Bank of India recently increased the capital adequacy ratio of NBFCs to 15% and removed the priority sector status of gold-loan companies. The company may be selling some gold loan portfolios to offset higher cost of borrowing arising out of non-priority sector status.  So far, Manappuram General Finance is the only fully-focused gold loan company listed in the bourses with a market capitalization of Rs 5,400 crore and available at a price earning ratio (P/E) of 22.73. On a trailing basis, Muthoot