Muthoot Microfin has finalised a deal with Dutch development finance institution Triple Jump to raise $15 million in non-convertible debentures, while it is in advanced stage of discussions to raise another $35 million from Swiss impact investor BlueOrchard even as the microfinance sector is facing headwinds with symptoms of overheating visible in some pockets.
Muthoot Microfin chief executive Sadaf Sayeed told ET that out of $15 million from Triple Jump, it has already received $12 million while the remaining $3 million is expected in October. He said the deal with BlueOrchard is likely to be completed next month.
Muthoot will be paying 10.6% per annum for the five year unsecured loan from Triple Jump, Sayeed said. The interest rate is benchmarked to the secured overnight financing rate (SOFR).
The cost was lower than the company’s average cost of funds of 11.17% but higher than the incremental cost of funds at 10.39% for the past nine months.
“This is part of our resource diversification strategy,” Sayeed said.
The NCD will be listed at BSE’s India International Exchange (India INX) at Gift City.
ET had on August 12 reported that Muthoot was in talks with two European investors for raising $50 million in external commercial borrowing.
The Kerala-headquartered NBFC-MFI is relying on external borrowing to diversify the funding sources as well as reduce cost of funds. Prior to the latest development, it had already mobilised $113 million this year for three years and three months at 9.6% per annum.
It raised $75 million in March from RakBank (National Bank of Ras Al Khaimah), Union Bank of India UK Ltd and Canara Bank, GIFT City. This was followed up by another $38 million in June, mobilised from Union Bank of India (DIFC branch), Bank of Bahrain and Kuwait, Bank of India (DIFC branch, Dubai) and Mega International Commercial Bank Co (Labuan Branch).
The lender last week reported an 18% year-on-year rise in June quarter net profit at Rs 113 crore against Rs 96 crore in the year-ago period, backed by healthy earnings growth. Its net interest margin for the quarter rose to 13.29% from 12.05% in the year-ago period, against a guidance of 13%.
The microfinance sector as a whole is facing headwinds due to multiple factors like severe heat waves especially across northern states, a two-month long general election disrupting mobility of field workers and overheating of credit affecting repayment capacity of borrowers. The sector’s gross loan outstanding shrank to Rs 4.33 lakh crore at the end of June as compared with Rs 4.42 lakh crore three months prior to that.
