ICRA upgrades long-term debt rating of Muthoot Finance to AA+

ICRA has upgraded its ratings on the long-term debt facilities of Muthoot Finance Limited to ‘[ICRA] AA+(Stable)’ from ‘[ICRA]AA(Stable)’.

The rating upgrade 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’ regarding timely servicing of financial obligations, and such instruments carry very low credit risk.

This rating upgrade will enable the company to raise more long term debt funds and attract a wider set of investors. This upgrade can further attract retail investors’ investments in the public issue of NCDs in which the company has a track record of 24 issuances raising ₹17,392 crore cumulatively. Moreover, the company will be able to raise funds at much more competitive rates.

George Alexander Muthoot, Managing Director, said “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 the gold loan industry as well as its robust financial standing. We wish to highlight that the achievement of this rating level for Muthoot Finance Ltd is on a standalone basis without any parental support factored in this rating. We continue steadfast in the mission of making Indians Atmanirbhar and supporting the financial needs of every individual as well as MSMEs.”

ICRA, in its rating rationale, has stated that “The rating upgrade factors in the sustained healthy financial performance of Muthoot Finance Limited 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 five years to ₹49,622 crore as of December 2020 and accounted for about 90 per cent 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 per cent 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.”