muthoot microfin: Muthoot Microfin to raise $25 million from Swiss investor ResponsAbility

The first tranche of $15 million was executed on October 15 after receiving regulatory approval while the balance of $10 million is scheduled for execution in November, Muthoot Microfin’s chief executive Sadaf Sayeed said.

The effective cost of borrowing comes to 11.3%. The pricing is 500 basis points over the secured overnight financing rate (SOFR),which is at 2.28%, and includes the hedging cost.

“ECB allows us to borrow long term funds for 5-7 years which helps in building a positive asset liability profile. It allows us to revolve the facility a couple of times hence justifying 75-100 basis points extra cost,” Sayeed told ET.

“It also helps us diversify our liability mix,” he said.

The lender, the microfinance arm of Kerala-based Muthoot Pappachan group, is exploring possibilities of more ECBs in the near future. A recent rating upgrade by Crisil Ratings on its long-term bank facilities and debt programmes may help it reduce the cost of borrowing.

“Our improved rating will help us access cheaper debt and allow us to borrow from newer sources of capital like ECB or retail non-convertible debentures (NCD), which will help us build a bigger portfolio and expand our customer base,” Sayeed said.

It has 21 crore customers at present.

The NBFC-MFI raised Rs 3,297 crore between April andSeptember with about three-fourth of its coming in the second quarter. The overall NCD outstanding of the company crossed Rs 1,000 crore and the company is targeting to double it by end of the current fiscal.

The rating upgrade factored in Muthoot Microfin’s adequate capitalization,long track record and above average earnings profile. In the last week of September, UK’s Greater Pacific Capital increased its holding in Muthoot Microfin to about 16% from 14.37% by a $10 million infusion.

“The moderation in asset quality, geographical concentration in MML’s portfolio and the susceptibility of the microfinance sector to various regulatory and legislative risks partially offset the above strengths,” Crisil said.

However, the rating company added that the MFI’s growth momentum that moderated in the aftermath of the second pandemic wave, picked up from July 2021 onwards. The lender’s assets under management grew to Rs 7400 crore at the end of September from Rs 6,238 crore seen six months prior to that.