Muthoot Microfin plans to raise around $200 million through external commercial borrowings (ECB), with the transaction likely to be executed in March or April, as the lender looks to secure long-term funds for its growth plans. Last year, the company raised an ECB of $113 million.
We are looking at an ECB transaction most likely in March or maybe in April. Once we conclude the broad commercial terms, we will do the roadshows and close the transaction,” Sadaf Sayeed, Chief Executive Officer of the company said, adding that the funds are expected to start flowing into the system by April.
Long-Term Funding for Secured Loan Diversification
The borrowing, with a tenure of over three years, and will be used primarily for onward lending and to support the company’s expansion into longer-tenure products such as individual loans, loan against property (LAP), and gold loans. “This is long-term money as required by ECB definition, and it helps us fund products like individual loans and LAP, which require longer-duration capital,” he said.
The microfinance lender is targeting around 15% growth in assets under management (AUM) in the current financial year. It expects AUM to rise to around Rs 14,000 crore, from about Rs 12,200 crore at the end of the previous year. “We are already at about Rs 13,100 crore, so the trajectory is in line with our expectations,” he said.
Gold Loans and Individual Credit
Newer products are expected to account for a growing share of the loan book. “Individual loans, LAP and gold loans together will contribute close to Rs 2,000 crore, or roughly 15% of our AUM.” The individual loan portfolio has crossed Rs 1,000 crore, while the gold loan book, currently at around Rs 15 crore, is expected to scale up rapidly. “Gold is a fast-building portfolio for us and could reach around Rs 200 crore by March,” he added. On asset quality, he said that the fresh portfolio is behaving very well and delinquencies have come down sharply.