ICRA raises Muthoot Finance’s long-term debt rating to AA +
ICRA has upgraded its ratings on Muthoot Finance Limited’s long-term debt facilities to ‘[ICRA] AA + (Stable) ‘of'[ICRA]AA (stable) ”.
Upgrading the rating means achieving the best rating in the category and this rating is just one level below the “AAA” rating, which is the highest rating for long-term debt instruments. The rating indicates “high security” regarding the timely servicing of financial obligations, and these instruments carry very low credit risk.
This rating improvement will allow the company to raise more long-term debt funds and attract more investors. This upgrade may further attract investment from retail investors into the public NTM issue in which the company has a history of 24 issues raising ₹ 17,392 crore cumulatively. In addition, the company will be able to raise funds at much more competitive rates.
George Alexander Muthoot, Managing Director, said: “With this improvement in the ICRA rating, Muthoot Finance Ltd has taken an important milestone in the AA + rating of two rating agencies, previously of CRISIL. This is recognition of its leading position in the market in the gold lending sector as well as its solid financial position. We would like to emphasize that obtaining this rating level for Muthoot Finance Ltd is done independently without any parental support taken into account in this rating. We steadfastly continue in the mission of making Atmanirbhar Indians and supporting the financial needs of each individual as well as MSMEs. “
ICRA, in its rating rationale, stated that “the rating upgrade takes into account the continued good financial performance of Muthoot Finance Limited as well as the ramp-up of the overall portfolio, which was largely driven through gold lending activities. MFL’s gold loan portfolio has more than doubled over the past five years to reach ₹ 49,622 crore in December 2020 and represented around 90% of its overall consolidated portfolio. Credit costs in the gold lending activities have been brought under control, which improves the performance of the consolidated results. ICRA expects consolidated earnings performance to remain healthy, as gold loans would represent around 85 to 90 percent of the overall loan portfolio. MFL’s capitalization profile, characterized by consolidated debt under management of around 3.5 times in December 2020, should also remain comfortable in the medium term, supported by its expected good regularizations. “