ICRA upgrades long term debt rating of Muthoot Finance Ltd from '[ICRA]AA(Stable)' to '[ICRA]AA+(Stable)'

ICRA has upgraded its ratings on the long-term debt facilities of Muthoot Finance Limited (Muthoot Finance) from '[ICRA]AA(Stable)' to '[ICRA]AA+(Stable)' (pronounced as [ICRA] Double A Plus).

ICRA in its rating rationale has stated that "The rating upgrade factors in the sustained healthy financial performance of Muthoot Finance Limited (MFL) along with the scale-up in the overall portfolio which was largely led by the gold loans business. MFL's gold loan book has more than doubled over the last 5 years to Rs. 49,622 crore as in December 2020 and accounted for about 90% of its overall consolidated portfolio. The credit costs in the gold loan business have been under control, which uplifts the consolidated earnings performance. ICRA expects the consolidated earnings performance to remain healthy as gold loans would account for about 85-90% of the overall lending portfolio. MFL's capitalisation profile characterised by a consolidated managed gearing of about 3.5 times as of December 2020 is also expected to remain comfortable over the medium-term supported by its expected healthy accruals."

The rating rationale also stated that "The ratings continue to factor in MFL's long track record and its leadership position in the gold loan segment, its established franchise with a pan-India branch network, and its efficient internal controls and monitoring systems. MFL's ability to raise funds from diverse sources, current on-balance sheet liquidity and short-term nature of the loans results in strong liquidity profile."

The change from 'AA' to 'AA+' signifies reaching the highest standing in the category and this rating is just one level below 'AAA' rating which is the highest rating for long term debt instruments. The rating denotes 'High Safety' and 'Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.'

This rating upgrade will enable the Company to raise more long term debt funds as well as attract wider set of investors. This upgrade can further attract investments from Retail Investors in the Public Issue of NCDs in which Company has track record of 24 issuances raising Rs. 17392crs cumulatively. Moreover, Company will be able to raise funds at much more competitive rates.

George Alexander Muthoot, Managing Director, on this occasion, stated "With this rating upgrade from ICRA, Muthoot Finance Ltd has crossed a major milestone of AA+ credit rating from two rating agencies, earlier being from CRISIL. It is a recognition of its market leadership position in gold loan industry as well as strong financial position. We wish to highlight that the achievement of this rating level for Muthoot Finance Ltd is on standalone basis without any parental support factored in rating."

Shares of MUTHOOT FINANCE LTD. was last trading in BSE at Rs.1240 as compared to the previous close of Rs. 1238.65. The total number of shares traded during the day was 23788 in over 1516 trades.

The stock hit an intraday high of Rs. 1249 and intraday low of 1225.3. The net turnover during the day was Rs. 29410817.

Source : Equity Bulls

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