MUTHOOT FINANCE LTD

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MUTHOOT FINANCE LTD.
SUMMARY:
Muthoot Finance Ltd. is the largest player in the gold loan business in
India. 76% of its business is generated from the 5 southern states in the
Country. The Company has a market share of 19.5% in the organized sector as
on FY10. It is facing major legal hurdle related to Kerala State Money lender
Act which, if implemented will substantially reduce the profitability of the
Company as Kerala accounts to 24% of Companys business. Moreover, there is
a good probability for gold price to get corrected after this prolonged bull run
which may reduce the ticket size of the loans, leading to a drop in growth and
associated profitability. We are quite bullish on the growth potential of this
firm but we would like to avoid the scrip until the abovementioned factors are
sorted out and the scrip is available at a deep discount.
INTRODUCTION OF THE MUTHOOT FINANCE LTD
Incorporated in 1997, Muthoot Finance Ltd. is Indias largest gold loan
Company. It is a subsidiary of Muthoot Group which is headquartered at Kochi,
India. It provides personal and business loans secured by gold jewellery, or
Gold Loans, primarily to individuals who possess gold jewellery but could not
access formal credit within a reasonable time, or to whom credit may not be
available at all, to meet unanticipated or other short-term liquidity
requirements. It has the largest branch network among gold loan providers in
India with 1921 branches and a strong presence in the underserved rural and
semi-urban markets. In 2010, it received a fund infusion of Rs.250 cr. from
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private equity players like Baring India Private Equity, Matrix Partners India,
Kotak India Private Equity Fund and Well come Trust for a 6% stake in the
Company. In 2011, well comes Trust picked up an additional 1% stake from the
promoters, taking the total stake of private equity investors to 7%.
HISTORY - MUTHOOT FINANCE LTD
Our Company was originally incorporated as a private limited company
on March 14, 1997 with the name The Muthoot Finance Private Limited
under the Companies Act. Subsequently, by fresh certificate of incorporation
dated May 16, 2007, our name was changed to Muthoot Finance Private
Limited. The Company was converted into a public limited company on
November 18, 2008 with the name Muthoot Finance Limited and received a
fresh certificate of incorporation consequent upon change in status on
December 02, 2008 from the RoC.
Merger with Muthoot Enterprises Private Limited Our Company, along
with Muthoot Enterprises Private Limited, filed a composite scheme of
arrangement bearing C.P. Nos. 48 and 50 of 2004 under the Companies Act
before the High Court of Kerala (Scheme of Amalgamation). The Scheme of
Amalgamation was approved by the board of directors of our Company
through the board resolution dated April 28, 2004.
Pursuant to the approval of the Scheme of Amalgamation by the High
Court of Kerala by an order dated January 31, 2005, Muthoot Enterprises
Private Limited was merged with our Company, with effect from March 22,
2005 and the High Court of Kerala had instructed all the parties to comply with
the statutory and other legal requirements to make the Scheme of
Amalgamation effective.
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The company on March 22, 2005 filed a certified copy of the order of the
High Court of Kerala with the RoC.With the successful implementation of the
Scheme of Amalgamation, the undertaking of Muthoot Enterprises Private
Limited along with its assets and liabilities was transferred to and vested in our
Company.
KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR
1. 2001 RBI license obtained to function as an NBFC.
2. 2004 Obtained highest rating of F1 from Fitch Ratings for short term debt of
Rs. 200 million.
3. 2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500
million.
4. Merger of Muthoot Enterprises Private Limited with the Company
5. 2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short
term debt of Rs. 400 million.
6. 2007 Retail loan portfolio of the Company crosses Rs. 10 billion.
7. RBI accords status of Systemically Important ND-NBFC.
8. Branch network of the Company crosses 500 branches.
9. Net owned funds of the Company crosses Rs. 1 billion.
10. 2008 Net owned funds of the Company crosses Rs. 2 billion.
11. Retail loan and debenture portfolio crosses Rs. 20 billion and Rs. 10 billion
respectively.
12. F1 rating obtained from Fitch Ratings affirmed with an enhanced short
term debt of Rs. 800 million.
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13. Overall credit limits from lending banks crosses Rs. 5 billion.
14. Conversion of the Company into a public limited company.
15. Fresh RBI license obtained to function as an NBFC without accepting public
deposits, consequent to change in name.
16. 2009 Retail loan and debenture portfolio crosses Rs. 30 billion and Rs. 15
billion respectively.
17. Net owned funds of the Company crosses Rs. 3 billion.
18. Gross annual income crosses Rs. 5 billion.
19. Overall credit limits from lending banks crosses Rs. 10 billion.
20. 2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20
billion respectively.
21. Net owned funds of the Company crosses Rs. 4 billion.
22. Overall credit limits from lending banks crosses Rs. 20 billion.
23. ICRA assigns A1+ rating for short term debt of Rs. 2 billion.
24. CRISIL assigns P1+ rating for short term debt of Rs. 4 billion.
25. Branch network of the Company crosses 1,000 branches.
26. Demerger of the FM radio business into Muthoot Broadcasting Private
Limited.
27. Private equity investment of an aggregate of Rs. 1,575.45 million from
Matrix Partners India Investments, LLC and Baring India Private Equity Fund III
Limited.
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BACKGROUND - MUTHOOT FINANCE LTD
Muthoot finance is a flagship company of the Muthoot Group based in
Southern India. The group has a presence in diverse businesses including
financing, healthcare, real estate, education, hospitality, forex, wealth
management services, money transfer services, power generation and
entertainment.
Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based
largest gold financing company in India in terms of loan portfolio. The company
offers gold loan to individuals like small businessmen, vendors, traders, and
salaried individuals who cannot access formal credit for reasons like lack of
credit history, documentation, accessibility. The company generally gives small
ticket loans (average ticket size of ~`31000) with a tenor not exceeding one
year, thereby limiting interest risk and asset-quality concerns. The loan-to-
value varies from 60%-85%. Muthoot Finance Gold Loan portfolio as of
November 30, 2010 comprised approximately 4.1 mn loan accounts in India
which it serviced through 2263 branches across 20 states. The company has
further increased its branch network to 2611 branches as of February 28, 2011,
servicing an average of 67,953 customers per day in the month of February
2011. As of February 28, 2011, the company has employed 15,664 persons.
Other then Gold Loans business, the company provides money transfer
services through their branches as sub-agents of various registered money
transfer agencies.


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PRODUCT AND SERVICES OF THE MUTHOOT FINANCE
1. GOLD LOAN

Muthoot Finance, Indias largest gold loan company is the first choice of
Indians who want to make their dream a reality. May the dream be to start
their own business or to buy their own home, for over 124 years Muthoot
Finance has helped almost every Indians dream come true. Trusted by over
70000 customers every day, Muthoot Finance Gold Loan has services and
products that fit the need of any customer, making it the quickest, most
convenient and safest way to take a gold loan.
Key features of Gold Loan:
Loan disbursal in 5 minutes
Loans starts from 1,500 to 1 Crore
Minimal documentation and credit assessment requirements
High quality customer service in short response time
Evaluation of gold ornaments takes place in house.
Safety of Gold Ornaments: All branches as equipped with Strong Rooms
for keeping safe custody of Gold Ornaments
Gold Loan available at over 3,000 Muthoot Finance branches across
India
0% processing fees
Pre-payment option-without any penalty

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GOLD LOAN SCHEMES
Rs. 2,155/-
Scheme Name Value (per gram) Interest (% p.a.)
True Value Personal Loan (TPL) Rs. 1,035/- 12%
Super Value Personal Loan (SPL) Rs. 2,260/- 24%
Real Value Personal Loan (RPL) Rs 1,960/- 18%
Express Personal Loan (XPL) Rs. 2,090/- 21%

2. GOLD COINS
Now invest your wealth in the ever rising power of Gold with the Muthoot
Precious Metals Corporation. 24 carat Pure Gold Coins: Muthoot Precious
Metals Corporation presents Gold Coins with 999% purity (24 Carat). Invest in
safe, secure and profitable Gold Coins.
The Gold Coins hold many advantages:
999% pure
Finance schemes with easy monthly installments
Appreciating asset
Higher return on investment with no risks
Available in denominations such as 2g, 4g, 8g, 20g and 50g to suit every
pocket.
The ideal gift for your near and dear ones
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Silver Coins
999% pure Silver Coins
One of India's few financial players that deals in Silver Coins
Available in 50 gm and 100 gm
Available at over3, 000 Muthoot Finance brances across India

3. MONEY TRANSFER
One of the finest Money Transfer services in India, with over 700,000 transfers
annually, Muthoot Money Transfer is the largest payout centre in India.
Muthoot Money Transfer allows real time money transfers from across the
seas, with the money reaching the receiver in less than 10 minutes. The money
can be transferred from First Remit/Coinstar, Xpress Money, Ez Remit, Money
Gram, Royar Money, Global Money Transfer, Western Union, Transfast, Instant
Cash and even Muthoot Finances own branches abroad. The service boasts
low costs, high exchange rates and NO additional service charge to the
receiver.
The key highlights of this service are:
Fastest Money Transfer facility
No bank account needed for amounts up to Rs. 50,000
The receiver does not have to pay any service charge
Certified by the RBI
Access it in any of the 3000 branches across the country


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4. FOREIGN EXCHANGE
Muthoot Foreign Exchange offers you currency exchange facilities as well as
allows you to buy and sell foreign currency and Travellers cheques with
Muthoot Foreign Exchange service. With the wide network of almost 3000
branches, we ensure ease of transaction. Muthoot Foreign Exchange helps you
get competitive rates for all currencies and notes in 35 major currencies as well
as 100 miscellaneous ones!
A few features of our Foreign Exchange service:
Buying and selling of all major Travellers cheques and Travel Cards
Commission free encashment of Travellers cheques
Competitive rates for all currencies
Remittance of funds abroad for various purposes

5. MPOWER CARD
Your life is made infinitely easier with the Muthoot MPower Card, which is a
unique identity card with numerous benefits:
Access it anywhere in India
Earn Loyalty Points on every transaction at ANY Muthoot branch
Redeem these Loyalty Points for attractive gifts
Get Rs. 20 per gram extra on Gold Loan
Keep all your jewelry in our lockers free of cost (No locker charges!)
Rs. 50,000 Personal Accident Insurance coverage
Deposit and withdraw money from any branch on Real Time
Special overdraft scheme for MPower Cardholders.
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6. TRAVEL SMART
Within just a few months of its launch Muthoot Travel smart has already
become one of the leading IATA (International Air Transport Association)
accredited agencies and has got certified by IRCTC. Muthoot Travel smart
offers all the services of a travel agency and more, such as travel insurance and
foreign exchange Muthoot Travel smart carries forward the groups core values
of helping India make the right decision with their money by helping you
during your travels, both familial and official. In addition to the 3000 branches
of Muthoot Finance in India, the services of Muthoot Travel smart can be
accessed in 6 offices overseas as well.
The services offered under Travel smart include:
International & Domestic Ticketing
Railway Ticketing
Tours
Passport, Emigration & Visa
Travel Insurance









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VALUE ADDITION IN PRODUCT AND SERVICES OF THE
MUTHOOT FINANCE LTD
We have challenged ourselves to perform better than the best. We have
now launched a new venture in Gold Financing, offering Customers loan
against the security of Gold Exchange Traded Funds (ETFs) units. This will not
only add value to the services but also enable the Company to service financial
requirements of new Customer segment.
The visionary zeal, constant innovation and customer-oriented product
& service delivery deployed at every phase of its growth are indeed exemplary.
And Muthoot Group is now all set to go places, backed by its assets built by
extraordinary people and high values.
With the guiding principles of honesty, sincerity, confidence and service,
Muthoot Group has indeed come a long way. These values continue to drive all
business decisions of the Group Companies. With customer-centric products
and services to offer, the Group has been constantly innovating and evolving to
deliver superior products, transparent workplace practices, easy accessibility
and personalized services at all levels. Perhaps why, Muthoot Group has
earned the trust of millions of customers and associates across the country.
1. Muthoot Finance launches new gold loan scheme

Indian non-banking finance company (NBFC) Muthoot Finance Ltd Friday
announced the launch of a new gold loan scheme that will provide loans to
public against the security of Gold Exchange Traded Fund (ETF) across the
country.
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The new scheme Gold ETF Loan Scheme which will be made available
to the customers by July-end 2011 will help customers get loan against their
Gold ETF units to the extent of 85% of the net asset value (NAV) of ETFs, said a
press release issued by Muthoot Finance.
Gold ETFs are mutual fund units issued by Asset Management
Companies against 995 purity physical gold. They are listed and traded on
stock exchanges and can be bought and sold like stocks on a real-time basis.
Gold ETFs were valued at Rs 50 billion as of June 2011.
Loan against Gold ETF is a scheme through which Muthoot Finance
plans to venture into totally new segment of gold financing which would not
only add value but also enable the company to service the financial
requirements of newer customer segments, said George Alexander Muthoot,
managing director of Muthoot Finance during the launch.

2. MUTHOOT FINANCE LAUNCHES THE WESTERN
UNION

MONEY TRANSFER
SM
SERVICE:
May 27, 2011, Kochi, India: International money transfer consumers across
Kerala - Indias foremost remittance driven economy will now be able to
receive their Western Union Money TransferSM transactions from Muthoot
Finance - a leading Kerala based financial institution.
Muthoot Finance will now offer Western Union Money Transfer services
from its countrywide network of 2800 locations linking them to Western
Unions network of more than 400,000 locations in over 200 countries and
territories across the world.
Launching the service, Mr George Alexander Muthoot Managing
Director, Muthoot Finance Ltd said, Here, on this occasion, three of the
biggest players of the Indian Financial Services industry have come together
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with the intention of providing a premium money transfer service to customers
across the country.
Muthoot Finance Ltd., through its extensive network of branches, aims
to capitalize the huge potential of the money transfer business in India.
With its expansive global network, Western Union is uniquely
positioned to deliver fast, reliable and convenient money transfer services to
consumers across remote geographical locations globally.
Through our agreement with Western Union we have facilitated a
number of classes of trade including retail and banks to offer Western Union
Money TransferSM services to the remotest corners of India. The
collaboration with Muthoot Finance is one more step in this direction which
would positively impact people across the 2,800 branches offering the service,



















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ROLE OF CRM IN PRODUCT AND SERVICES OF THE
MUTHOOT FINANCE LTD
CRM at MUTHOOT FINANCE involves increased communication between the
bank and its present and prospective customers. Its philosophy focuses on
each and every customers satisfaction. CRM facilitated coordination of
multiple business functions and multiple channel of communication with the
customers to carry out customer management more efficiently. It also
automated the process flow tracking in the product sales process and helped
to generate customized reports and promote cross-selling. The typical
components of CRM strategy at MUTHOOT FINANCE LIMITED are as follows:












1. Deliver increased
value to customer
2. Interact with
customers

1. Acquire customers
2. Retain valuable
customers
1. Acquire customers
needs
2. Differentiate based
on different needs,
behavior and
characteristics
1. Customize by
customer segment,
2. Develop product,
service, and channel
to meet the customer
needs.
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The spectacular growth of the Muthoot finance ltd is the result of trust
and confidence that millions of our satisfied Customers have reposed in
us and the legacy of 124 years based on values & ethics.
Over the years, we have helped people fulfilling their dreams &
ambitions by providing meaningful, honest and unparalleled services &
Products.
Remember, excelling and managing Customer relationship is the future
of any Business. The Customer focusing is not to be viewed as just a
Business strategy but should become a Corporate Mission. In order to
create a branded service, it is important to become Customer-centric.
Titan Industries, the Largest Jewellery Chain in Tamil Nadu has joined
hands with Indias Largest Gold Loan Company MuthootFinance
Limited to enable customers to realize their dream of owning gold
jewellery by paying 15% of actual price on buying and remaining price in
monthly installments. This tie-up aims to enable thousands of customers
in the rural India, own and invest in gold jewellery of their choice from
Goldplus, without selling their old jewellery or other assets.












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CONCLUSION
Muthoot Finance is a company that provides support to the banking and
financial sector in the various arenas of life, gold is a major part of all offers.
Website: www.muthootfinance.com information in each category Muthoot
Finance Corporate glad enough remit to cover all loans of gold, precious
metals, money, money, securities, Travel Smart, financing of vehicles and
Muthoot and currency in the world. Therefore, all areas of life greatly help
improve the confidence of the Muthoot Finance.
Muthoot Finance website has been developed to obtain from each
country, so interested can rely on the advice of the business and seeking a
better life. Do not dream to the conclusion come Muthoot Finance Company.
All documents and processes undertaken to grant a simple correspondence
minutes, and then, bearing in mind the flexibility of case studies.
Muthoot Finance in Poland is aware that it is the fastest growing
company largest loan, which offers a variety of gold trade, personal loans,
housing, education, investments, etc., low interest rates on the site, only 1% of
the Muthoot Finance Web site to keep people from all over India in place of
promise and improvement. But still the main lending. The company employs
around 17,000 branches in the country and about 45,000 new customers.
Therefore, instead of this account are a revelation for those who are
salivating has the gold, and various activities in recent years. E was acquired
by exposure to the benefits that other concepts by Muthoot Finance Trust can
be created. Mobile indicates that the page will look attractive to those who
want to reach a new direction in life and to stop taking Muthoot Finance and
all the dreams that you want to.

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RECOMMENDATION
CRISIL and ICRA have both assigned Grade 4 to the IPO which means
that the IPO has above average fundamentals. Gold is having a dream run in
commodities market and the issue seems priced fairly. The company has good
growth potential in the medium term.
We believe MFL is a pure gold play in the burgeoning Indian consumer
Gold Loan market with is growth 15-18% CAGR. We are positive on the
business outlook on the loan against gold. With the above rationale like Strong
brand, track record and management expertise, we advice investors to park
there investment with a medium-to-long term horizon. With less competition
in the business segment MFL is well set in its segment because of it brand
loyalty they have retained in the south Indian states. Now main focus is to
penetrate the North Indian markets by adopting new strategies and also
increasing sales from other investment alternative. Comparable peers like
Manappuram and other NBFC are trading at price to earnings multiples of 18-
23x and MFL is available at 18x.