Kolkata: Muthoot Microfin, the microfinance arm of Kerala-based financial services group Muthoot Pappachan Group, is looking to raise $50 million in external commercial borrowing (ECB) in a bid to diversify fund sources and elongate the liability profile.
“We are in active conversation with multiple investors. It will be a syndicated deal and may happen in the second quarter,” Sadaf Sayeed, chief executive of Muthoot Microfin, told ET. He expects to raise the resource at a cost lower than the average cost of funds.
The lender’s incremental cost of borrowing for the past nine-month period was 10.39% against the average of 11.17%.
“Another advantage of ECB is that it is long-term borrowing of three years and above while it diversifies our resource base,” Sayeed said. At present, ECB contributes merely 5% of Muthoot Microfin’s funding sources.
In March, the non-banking finance company micro finance institution (NBFC-MFI) had mobilised $75 million of overseas loans from Standard Chartered Bank, Doha Bank, RakBank (National Bank of Ras Al Khaimah), Union Bank of India UK Ltd and Canara Bank’s GIFT City branch with the blended cost coming to 9.58% a year.
The Ernakulam-headquartered lender raised Rs 9,800 crore overall in FY24 and looks to mobilise Rs 3,500 crore incrementally this financial year.
Term loans from banks account for about 45% of its borrowing, while 25% comes from securitisation of assets through direct assignments, 12% from private placement of bonds, and a balance 13% from development financial institutions, Sayeed said.
“We are expecting a rating upgrade and once it happens, we will consider a public issue of bonds,” he said.
The lender on Monday reported a 27% year-over-year jump in its net profit for the quarter ended March at Rs 120 crore while the annual profit for FY24 soared 174% to Rs 450 crore against Rs 164 crore in the preceding fiscal.
The company, which was listed on the stock exchanges on December 26 last year, is not considering any dividend payment to shareholders.
“We are in a growth stage and need to conserve capital,” Sayeed said.
