Muthoot Finance Ltd

MUTHOOT FINANCE LTD

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 Company’s 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 India’s 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

Page 1CRM IN FINANCIAL SERVICE

MUTHOOT FINANCE LTD

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.


MUTHOOT FINANCE LTD

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.


MUTHOOT FINANCE LTD 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.


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.


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.


MUTHOOT FINANCE LTD

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.


MUTHOOT FINANCE LTD

PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

1. GOLD LOAN

Muthoot Finance, India’s 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 Indian’s 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


MUTHOOT FINANCE LTD 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

Silver Coins


MUTHOOT FINANCE LTD 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 Finance’s 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

4. FOREIGN EXCHANGE


MUTHOOT FINANCE LTD Muthoot Foreign Exchange offers you currency exchange facilities as well as

allows you to buy and sell foreign currency and Traveller’s 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 Traveller’s cheques and Travel Cards

Commission free encashment of Traveller’s 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.

6. TRAVEL SMARTPage 9

CRM IN FINANCIAL SERVICE

MUTHOOT FINANCE LTD 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 group’s 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


MUTHOOT FINANCE LTD

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.

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


MUTHOOT FINANCE LTD 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 TRANSFERSM SERVICE:

May 27, 2011, Kochi, India: International money transfer consumers across

Kerala - India’s 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

Union’s 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

with the intention of providing a premium money transfer service to customers

across the country”.


MUTHOOT FINANCE LTD 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,”


MUTHOOT FINANCE LTD

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 customer’s 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 customer’s 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.

MUTHOOT FINANCE LTD 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 India’s 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.


MUTHOOT FINANCE LTD

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.


MUTHOOT FINANCE LTD

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.


Documents

Muthoot Finance Ltd