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511766 Financial Services Credit Services

Muthoot Capital Services Limited (MCSL), promoted by the Muthoot

Pappachan Group, is a Non-Banking Finance Company (NBFC) registered

with the Reserve Bank of India (RBI). Established in 1994, MCSL offers a

portfolio of services including commercial and consumer finance productslike vehicle loans, lease and hire purchase loans and bill discounting. The

company has its registered office located in Cochin, Kerala and distributes

its products through a wide spread branch network of its sister concern,

Muthoot Fincorp Ltd.

MSCLs key management includes the two brothers, Thomas John

Muthoot and Thomas George Muthoot.

Thomas John Muthoot serves as the Chairman of the company. He is also

the Director of the holding company, Muthoot Pappachan Group, and holds

leadership positions in the various group companies, including the position

of Managing Director for Muthoot Fincorp Ltd. He holds a B.Com degree

and has more than 27 years of experience in the financial services sector.

Thomas George Muthoot serves as the Managing Director of MCSL and

has been associated with the company since 1994. He holds a B.com

degree and is the Chairman of Kerala Non-Banking Finance Companies

Welfare Association, Kochi.

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MCSL offers financial services to retail, corporate and institutional

customers in the states of Tamil Nadu, Andhra Pradesh, Karnataka, Goa,

Gujarat and Maharashtra. The company provides vehicle loans, gold loans,

SME loans, mortgage loans, and loans against property and securities.

Close to 98% of the companys loan portfolio comprises of vehicle loans

and as of March 31, 2012 it had over one lakh two wheeler loan

customers.

The company has raised funds from a privately placed debenture, bank

borrowings and loans from its directors to lend to its customers, since it is

a non-deposit taking NBFC.

Price in Rs.

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81.60(21/09/2012)

86.80/51.15

92.98

(31/08/2012)

4540.88 (1 Mo)

(Rescaled to 100 for ease of comparison)

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Values in Rs. Crores

Revenue 8.38 11.17 15.54 25.57 45.90

Gross Margin % - - - - -

Operating Income 6.12 8.35 10.87 14.51 23.01

Operating Margin % 72.98 74.78 70.00 56.72 50.12

Net Income 4.00 5.42 7.17 9.67 15.51

Diluted EPS 6.16 8.33 11.04 14.87 13.12

Book Value Per Share 18.77 24.77 32.88 44.26 133.82

Operating Cash Flow -8.91 -17.55 -24.37 -63.23 -107.79

Capital Expenditure -0.09 -0.03 -0.17 -0.35 -0.89

Free Cash Flow 1.14 1.52 1.90 2.27 -42.71

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Return on Assets % 0.09 0.09 0.08 0.07 0.06

Return on Equity % 0.37 0.38 0.38 0.39 0.27

Asset Turnover 0.19 0.18 0.17 0.18 0.19

Net Margin % 0.48 0.49 0.46 0.38 0.34

Financial Leverage% 3.98 4.57 4.90 6.28 3.63

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Long Term Debt - - - - -

Total Equity 12.20 16.10 21.37 28.77 86.99

Debt/Equity 2.84 3.31 3.74 5.10 2.35

Working Capital - - - - -

Report as of 26-Sep-2012. Initiative of the BSE Investors Protection Fund. 2012 Morningstar. All Rights Reserved. The information, data, analyses andopinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do notconstitute investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell asecurity, (5) are not warranted to be correct, complete or accurate, and (6) Except as otherwise required by law, Morningstar shall not be responsible forany trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report shouldnot be confused with Morningstar Equity Research. Please read the company annual report for further analysis before building a position in this stock.

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Total Revenue 8.38 11.17 15.54 25.57 45.90

Cost of Revenue - - - - -

Gross Profit - - - - -Operating Expense 2.26 2.82 4.66 11.07 22.89

Operating Income 6.12 8.35 10.87 14.51 23.01

Pre-tax Income 6.12 8.35 10.87 14.51 23.01

Tax Provision 2.11 2.93 3.70 4.84 7.50

Minority Interests - - - - -

Net Income 4.00 5.42 7.17 9.67 15.51

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Stock Holders Equity 12.20 16.10 21.37 28.77 86.99

Long Term Debt - - - - -

Total Non-Current Liabilities - - - - -

Payables - - - - -

Total Liabilities 36.37 57.42 83.30 151.79 228.60

Net PPE 0.44 0.35 0.43 0.64 1.18

Goodwill and other Intangible Assets - - - - -

Total Investments - - - - -

Total Non-current Assets - - - - -

Trading and Other Receivables - - - - -

Inventory - - - - -

Cash and Cash Equivalents - - - - -Total Assets 48.57 73.52 104.66 180.56 315.58

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Net Income 4.00 5.42 7.17 9.67 15.51

Depreciation and Amortization 0.11 0.08 0.09 0.14 0.31

Change in Working Capital -13.01 -23.00 -31.64 -73.54 -124.48

Operating Cash Flow -8.91 -17.55 -24.37 -63.23 -107.79

Capital Expenditure -0.09 -0.03 -0.17 -0.35 -0.89

Investing Cash Flow -0.10 - -0.17 -0.34 -0.87

Net Common Stock Issuance 7.08 10.24 -0.15 1.34 47.78

Net Issuance Payments of Debt -2.23 8.40 26.39 35.35 69.91

Cash Dividends Paid - - -1.52 -1.90 -2.23

Financing Cash Flow 4.86 18.63 24.71 64.79 115.46

Changes in Cash -0.26 1.09 0.17 1.22 6.80


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In FY 2012, MCSL revenue from operations grew by 79% to Rs. 45.9 crores

as against Rs. 25.6 crores in FY 2011. The company registered an

operating income of Rs. 23.0 crores as compared to an operating income

of Rs. 14.5 crores in the previous year. Its net profits stood at Rs. 15.5crores an increase of 60% from Rs. 9.7 crores in FY 2011.

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The three main risks faced by NBFCs are regulatory risk, fluctuation in

asset valuation taken as security against the loan, and changes in

consumer demand for loans. Firstly, the RBI regulates the functioning of all

NBFCs and any change in regulations may jeopardize the existence of an

NBFC. Secondly, NBFCs take shares, gold, vehicle or property as security

against the loan they disburse. If the value of these secured assets falls

drastically, there will be an asset-liability mismatch on the balance sheet of

the company. Lastly, NBFCs depend on demand for loans from consumers

and business entities, and compete with banks to service these

requirements.

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Shriram Transport Finance Company Ltd, and Cholamandalam Investment

and Finance Company Ltd, are some of MCSLs competitors.

Shriram Transport Finance, the flagship company of Shriram Group, is the

largest vehicle-financing NBFC having 25% market share in pre-owned, and

7% share in new truck financing. It has approximately 502 branches and

15,057 employees as of March 31, 2012. Its assets under management

grew by 24% to Rs. 40,214 crores in FY 2012, as compared to Rs. 36,183

crores a year before. The companys revenue from operations for FY 2012

was Rs. 6,187 crores from Rs. 5,455 crores a year ago, an increase of

13.4%.

Cholamandalam Investment and Finance Company Ltd, a non-deposit

taking NBFC, is engaged in providing vehicle finance, home loans,

corporate mortgage loans and gold loans. The company, through its

subsidiaries, also engages in the business of broking and distribution of

financial products. It has approximately 1400 employees and 375

branches. Its assets under management grew by 48% to Rs. 13,462 crores

in FY 2012 as compared to Rs. 9,124 crores a year before. The revenue

from operations for FY 2012 stood at Rs. 1,779 crores from Rs. 1,206

crores a year ago, an increase of 47.5%.

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NBFCs have been playing a complimentary role to the banking sector, by

catering to the unbanked sectors and promoting financial inclusion. It is

estimated that the NBFC industry accounts for 11.2% of total assets in the

Indian financial system. The total asset size of non-banking financecompanies increased to Rs. 44,510 crores in FY 2012 according to RBIs

Financial Stability Report, from Rs. 5,480 crores in FY 2009.

With simplified sanction procedures, NBFCs have an edge over banks in

meeting the credit needs of its customers. While there have been recent

changes in RBI regulations governing NBFCs, the long-term demand for

fast and convenient loans will ensure that the NBFC business is here to

stay.

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Revenue 12.19 14.68 16.66 23.48 22.04

Other Income 0.04 0.07 0.02 0.21 0.13

Total Income 12.23 14.75 16.68 23.69 22.17

Expenditure -8.63 -9.63 -11.69 -7.74 -7.32

Interest - - - -6.33 -7.19

PBDT 3.59 5.12 4.99 9.62 7.66

Depreciation -0.07 -0.05 -0.08 -0.11 -0.10

PBT 3.52 5.07 4.91 9.51 7.56

Tax -1.17 -1.69 -1.52 -3.12 -2.63

Net Profit 2.35 3.38 3.39 6.39 4.93

Equity 6.50 12.47 12.47 12.47 12.47EPS 3.62 2.71 2.72 5.12 3.95

CEPS 3.73 2.75 2.78 5.21 4.03

OPM (%) 29.48 34.90 29.94 67.93 67.38

NPM (%) 19.31 23.03 20.34 27.21 22.37

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MSTAR_511766_2012_IN