MUTHOOT FINANCE LTD

MUTHOOT FINANCE LTD.SUMMARY:Muthoot Finance Ltd. is the largest player in the gold loan business in India. 76% of its business is generated from the 5 southern states in the Country. The Company has a market share of 19.5% in the organized sector as on FY10. It is facing major legal hurdle related to Kerala State Money lender Act which, if implemented will substantially reduce the profitability of the Company as Kerala accounts to 24% of Companys business. Moreover, there is a good probability for gold price to get corrected after this prolonged bull run which may reduce the ticket size of the loans, leading to a drop in growth and associated profitability. We are quite bullish on the growth potential of this firm but we would like to avoid the scrip until the abovementioned factors are sorted out and the scrip is available at a deep discount.INTRODUCTION OF THE MUTHOOT FINANCE LTDIncorporated in 1997, Muthoot Finance Ltd. is Indias largest gold loan Company. It is a subsidiary of Muthoot Group which is headquartered at Kochi, India. It provides personal and business loans secured by gold jewellery, or Gold Loans, primarily to individuals who possess gold jewellery but could not access formal credit within a reasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. It has the largest branch network among gold loan providers in India with 1921 branches and a strong presence in the underserved rural and semi-urban markets. In 2010, it received a fund infusion of Rs.250 cr. from

private equity players like Baring India Private Equity, Matrix Partners India, Kotak India Private Equity Fund and Well come Trust for a 6% stake in the Company. In 2011, well comes Trust picked up an additional 1% stake from the promoters, taking the total stake of private equity investors to 7%.HISTORY - MUTHOOT FINANCE LTDOur Company was originally incorporated as a private limited company on March 14, 1997 with the name The Muthoot Finance Private Limited under the Companies Act. Subsequently, by fresh certificate of incorporation dated May 16, 2007, our name was changed to Muthoot Finance Private Limited. The Company was converted into a public limited company on November 18, 2008 with the name Muthoot Finance Limited and received a fresh certificate of incorporation consequent upon change in status on December 02, 2008 from the RoC.Merger with Muthoot Enterprises Private Limited Our Company, along with Muthoot Enterprises Private Limited, filed a composite scheme of arrangement bearing C.P. Nos. 48 and 50 of 2004 under the Companies Act before the High Court of Kerala (Scheme of Amalgamation). The Scheme of Amalgamation was approved by the board of directors of our Company through the board resolution dated April 28, 2004.Pursuant to the approval of the Scheme of Amalgamation by the High Court of Kerala by an order dated January 31, 2005, Muthoot Enterprises Private Limited was merged with our Company, with effect from March 22, 2005 and the High Court of Kerala had instructed all the parties to comply with the statutory and other legal requirements to make the Scheme of Amalgamation effective.

The company on March 22, 2005 filed a certified copy of the order of the High Court of Kerala with the RoC.With the successful implementation of the Scheme of Amalgamation, the undertaking of Muthoot Enterprises Private Limited along with its assets and liabilities was transferred to and vested in our Company.KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR1. 2001 RBI license obtained to function as an NBFC.2. 2004 Obtained highest rating of F1 from Fitch Ratings for short term debt of Rs. 200 million.3. 2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500 million.4. Merger of Muthoot Enterprises Private Limited with the Company5. 2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short term debt of Rs. 400 million.6. 2007 Retail loan portfolio of the Company crosses Rs. 10 billion.7. RBI accords status of Systemically Important ND-NBFC.8. Branch network of the Company crosses 500 branches.9. Net owned funds of the Company crosses Rs. 1 billion.10. 2008 Net owned funds of the Company crosses Rs. 2 billion.11. Retail loan and debenture portfolio crosses Rs. 20 billion and Rs. 10 billion respectively.12. F1 rating obtained from Fitch Ratings affirmed with an enhanced short term debt of Rs. 800 million.13. Overall credit limits from lending banks crosses Rs. 5 billion.14. Conversion of the Company into a public limited company.15. Fresh RBI license obtained to function as an NBFC without accepting public deposits, consequent to change in name.16. 2009 Retail loan and debenture portfolio crosses Rs. 30 billion and Rs. 15 billion respectively.17. Net owned funds of the Company crosses Rs. 3 billion.18. Gross annual income crosses Rs. 5 billion.19. Overall credit limits from lending banks crosses Rs. 10 billion.20. 2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20 billion respectively.21. Net owned funds of the Company crosses Rs. 4 billion.22. Overall credit limits from lending banks crosses Rs. 20 billion.23. ICRA assigns A1+ rating for short term debt of Rs. 2 billion.24. CRISIL assigns P1+ rating for short term debt of Rs. 4 billion.25. Branch network of the Company crosses 1,000 branches.26. Demerger of the FM radio business into Muthoot Broadcasting Private Limited.27. Private equity investment of an aggregate of Rs. 1,575.45 million from Matrix Partners India Investments, LLC and Baring India Private Equity Fund III Limited.

BACKGROUND - MUTHOOT FINANCE LTDMuthoot finance is a flagship company of theMuthoot Groupbased in Southern India. The group has a presence in diverse businesses including financing, healthcare, real estate, education, hospitality, forex, wealth management services, money transfer services, power generation and entertainment. Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based largest gold financing company in India in terms of loan portfolio. The company offers gold loan to individuals like small businessmen, vendors, traders, and salaried individuals who cannot access formal credit for reasons like lack of credit history, documentation, accessibility. The company generally gives small ticket loans (average ticket size of ~`31000) with a tenor not exceeding one year, thereby limiting interest risk and asset-quality concerns. The loan-to-value varies from 60%-85%. Muthoot Finance Gold Loan portfolio as of November 30, 2010 comprised approximately 4.1 mn loan accounts in India which it serviced through 2263 branches across 20 states. The company has further increased its branch network to 2611 branches as of February 28, 2011, servicing an average of 67,953 customers per day in the month of February 2011. As of February 28, 2011, the company has employed 15,664 persons. Other then Gold Loans business, the company provides money transfer services through their branches as sub-agents of various registered money transfer agencies.

PRODUCT AND SERVICES OF THE MUTHOOT FINANCE1. GOLD LOANMuthoot Finance, Indias largest gold loan company is the first choice of Indians who want to make their dream a reality. May the dream be to start their own business or to buy their own home, for over 124 years Muthoot Finance has helped almost every Indians dream come true. Trusted by over 70000 customers every day, Muthoot Finance Gold Loan has services and products that fit the need of any customer, making it the quickest, most convenient and safest way to take a gold loan.Key features of Gold Loan: Loan disbursal in 5 minutes Loans starts from1,500 to1 Crore Minimal documentation and credit assessment requirements High quality customer service in short response time Evaluation of gold ornaments takes place in house. Safety of Gold Ornaments: All branches as equipped with Strong Rooms for keeping safe custody of Gold Ornaments Gold Loan available at over 3,000 Muthoot Finance branches across India 0% processing fees Pre-payment option-without any penalty

GOLD LOAN SCHEMESRs. 2,155/-Scheme NameValue (per gram)Interest (% p.a.)

True Value Personal Loan (TPL)Rs. 1,035/-12%

Super Value Personal Loan (SPL)Rs. 2,260/-24%

Real Value Personal Loan (RPL)Rs 1,960/-18%

Express Personal Loan (XPL)Rs. 2,090/-21%

2. GOLD COINSNow invest your wealth in the ever rising power of Gold with the Muthoot Precious Metals Corporation.24 carat Pure Gold Coins: Muthoot Precious Metals Corporation presents Gold Coins with 999% purity (24 Carat). Invest in safe, secure and profitable Gold Coins.The Gold Coins hold many advantages: 999% pure Finance schemes with easy monthly installments Appreciating asset Higher return on investment with no risks Available in denominations such as 2g, 4g, 8g, 20g and 50g to suit every pocket. The ideal gift for your near and dear onesSilver Coins999% pure Silver CoinsOne of India's few financial players that deals in Silver CoinsAvailable in 50 gm and 100 gmAvailable at over3, 000 Muthoot Finance brances across India

3. MONEY TRANSFEROne of the finest Money Transfer services in India, with over 700,000 transfers annually, Muthoot Money Transfer is the largest payout centre in India. Muthoot Money Transfer allows real time money transfers from across the seas, with the money reaching the receiver in less than 10 minutes. The money can be transferred from First Remit/Coinstar, Xpress Money, Ez Remit, Money Gram, Royar Money, Global Money Transfer, Western Union, Transfast, Instant Cash and even Muthoot Finances own branches abroad. The service boasts low costs, high exchange rates and NO additional service charge to the receiver.The key highlights of this service are: Fastest Money Transfer facility No bank account needed for amounts up to Rs. 50,000 The receiver does not have to pay any service charge Certified by the RBI Access it in any of the 3000 branches across the country

4. FOREIGN EXCHANGEMuthoot Foreign Exchange offers you currency exchange facilities as well as allows you to buy and sell foreign currency and Travellers cheques with Muthoot Foreign Exchange service. With the wide network of almost 3000 branches, we ensure ease of transaction. Muthoot Foreign Exchange helps you get competitive rates for all currencies and notes in 35 major currencies as well as 100 miscellaneous ones!A few features of our Foreign Exchange service: Buying and selling of all major Travellers cheques and Travel Cards Commission free encashment of Travellers cheques Competitive rates for all currencies Remittance of funds abroad for various purposes

5. MPOWER CARDYour life is made infinitely easier with the Muthoot MPower Card, which is a unique identity card with numerous benefits: Access it anywhere in India Earn Loyalty Points on every transaction at ANY Muthoot branch Redeem these Loyalty Points for attractive gifts Get Rs. 20 per gram extra on Gold Loan Keep all your jewelry in our lockers free of cost (No locker charges!) Rs. 50,000 Personal Accident Insurance coverage Deposit and withdraw money from any branch on Real Time Special overdraft scheme for MPower Cardholders.

6. TRAVEL SMARTWithin just a few months of its launch Muthoot Travel smart has already become one of the leading IATA (International Air Transport Association) accredited agencies and has got certified by IRCTC. Muthoot Travel smart offers all the services of a travel agency and more, such as travel insurance and foreign exchange Muthoot Travel smart carries forward the groups core values of helping India make the right decision with their money by helping you during your travels, both familial and official. In addition to the 3000 branches of Muthoot Finance in India, the services of Muthoot Travel smart can be accessed in 6 offices overseas as well.The services offered under Travel smart include: International & Domestic Ticketing Railway Ticketing Tours Passport, Emigration & Visa Travel Insurance

VALUE ADDITION IN PRODUCT AND SERVICES OF THE MUTHOOT FINANCE LTDWe have challenged ourselves to perform better than the best. We have now launched a new venture in Gold Financing, offering Customers loan against the security of Gold Exchange Traded Funds (ETFs) units. This will not only add value to the services but also enable the Company to service financial requirements of new Customer segment.The visionary zeal, constant innovation and customer-oriented product & service delivery deployed at every phase of its growth are indeed exemplary. And Muthoot Group is now all set to go places, backed by its assets built by extraordinary people and high values.With the guiding principles of honesty, sincerity, confidence and service, Muthoot Group has indeed come a long way. These values continue to drive all business decisions of the Group Companies. With customer-centric products and services to offer, the Group has been constantly innovating and evolving to deliver superior products, transparent workplace practices, easy accessibility and personalized services at all levels. Perhaps why, Muthoot Group has earned the trust of millions of customers and associates across the country.1. Muthoot Finance launches new gold loan scheme

Indian non-banking finance company (NBFC) Muthoot Finance Ltd Friday announced the launch of a new gold loan scheme that will provide loans to public against the security of Gold Exchange Traded Fund (ETF) across the country.The new scheme Gold ETF Loan Scheme which will be made available to the customers by July-end 2011 will help customers get loan against their Gold ETF units to the extent of 85% of the net asset value (NAV) of ETFs, said a press release issued by Muthoot Finance. Gold ETFs are mutual fund units issued by Asset Management Companies against 995 purity physical gold. They are listed and traded on stock exchanges and can be bought and sold like stocks on a real-time basis. Gold ETFs were valued at Rs 50 billion as of June 2011. Loan against Gold ETF is a scheme through which Muthoot Finance plans to venture into totally new segment of gold financing which would not only add value but also enable the company to service the financial requirements of newer customer segments, said George Alexander Muthoot, managing director of Muthoot Finance during the launch.

2. MUTHOOT FINANCE LAUNCHES THE WESTERN UNIONMONEY TRANSFERSMSERVICE:May 27, 2011, Kochi, India:International money transfer consumers across Kerala - Indias foremost remittance driven economy will now be able to receive their Western Union Money TransferSMtransactions from Muthoot Finance - a leading Kerala based financial institution.Muthoot Finance will now offer Western Union Money Transfer services from its countrywide network of 2800 locations linking them to Western Unions network of more than 400,000 locations in over 200 countries and territories across the world.Launching the service, Mr George Alexander Muthoot Managing Director, Muthoot Finance Ltd said, Here, on this occasion, three of the biggest players of the Indian Financial Services industry have come together with the intention of providing a premium money transfer service to customers across the country.Muthoot Finance Ltd., through its extensive network of branches, aims to capitalize the huge potential of the money transfer business in India.With its expansive global network, Western Union is uniquely positioned to deliver fast, reliable and convenient money transfer services to consumers across remote geographical locations globally. Through our agreement with Western Union we have facilitated a number of classes of trade including retail and banks to offer Western Union Money TransferSMservices to the remotest corners of India. The collaboration with Muthoot Finance is one more step in this direction which would positively impact people across the 2,800 branches offering the service,

ROLE OF CRM IN PRODUCT AND SERVICES OF THE MUTHOOT FINANCE LTDCRM at MUTHOOT FINANCE involves increased communication between the bank and its present and prospective customers. Its philosophy focuses on each and every customers satisfaction. CRM facilitated coordination of multiple business functions and multiple channel of communication with the customers to carry out customer management more efficiently. It also automated the process flow tracking in the product sales process and helped to generate customized reports and promote cross-selling. The typical components of CRM strategy at MUTHOOT FINANCE LIMITED are as follows:

1. Acquire customers2. Retain valuable customers1. Deliver increased value to customer2. Interact with customers

1. Acquire customers needs2. Differentiate based on different needs, behavior and characteristics 1. Customize by customer segment,2. Develop product, service, and channel to meet the customer needs.

The spectacular growth of the Muthoot finance ltd is the result of trust and confidence that millions of our satisfied Customers have reposed in us and the legacy of 124 years based on values & ethics. Over the years, we have helped people fulfilling their dreams & ambitions by providing meaningful, honest and unparalleled services & Products. Remember, excelling and managing Customer relationship is the future of any Business. The Customer focusing is not to be viewed as just a Business strategy but should become a Corporate Mission. In order to create a branded service, it is important to become Customer-centric. Titan Industries, the Largest Jewellery Chain in Tamil Nadu has joined hands with Indias Largest Gold Loan Company MuthootFinance Limited to enable customers to realize their dream of owning gold jewellery by paying 15% of actual price on buying and remaining price in monthly installments. This tie-up aims to enable thousands of customers in the rural India, own and invest in gold jewellery of their choice from Goldplus, without selling their old jewellery or other assets.

CONCLUSIONMuthoot Finance is a company that provides support to the banking and financial sector in the various arenas of life, gold is a major part of all offers. Website: www.muthootfinance.com information in each category Muthoot Finance Corporate glad enough remit to cover all loans of gold, precious metals, money, money, securities, Travel Smart, financing of vehicles and Muthoot and currency in the world. Therefore, all areas of life greatly help improve the confidence of the Muthoot Finance.Muthoot Finance website has been developed to obtain from each country, so interested can rely on the advice of the business and seeking a better life. Do not dream to the conclusion come Muthoot Finance Company. All documents and processes undertaken to grant a simple correspondence minutes, and then, bearing in mind the flexibility of case studies.Muthoot Finance in Poland is aware that it is the fastest growing company largest loan, which offers a variety of gold trade, personal loans, housing, education, investments, etc., low interest rates on the site, only 1% of the Muthoot Finance Web site to keep people from all over India in place of promise and improvement. But still the main lending. The company employs around 17,000 branches in the country and about 45,000 new customers.Therefore, instead of this account are a revelation for those who are salivating has the gold, and various activities in recent years. E was acquired by exposure to the benefits that other concepts by Muthoot Finance Trust can be created. Mobile indicates that the page will look attractive to those who want to reach a new direction in life and to stop taking Muthoot Finance and all the dreams that you want to.

RECOMMENDATION CRISIL and ICRA have both assigned Grade 4 to the IPO which means that the IPO has above average fundamentals. Gold is having a dream run in commodities market and the issue seems priced fairly. The company has good growth potential in the medium term.We believe MFL is a pure gold play in the burgeoning Indian consumer Gold Loan market with is growth 15-18% CAGR. We are positive on the business outlook on the loan against gold. With the above rationale like Strong brand, track record and management expertise, we advice investors to park there investment with a medium-to-long term horizon. With less competition in the business segment MFL is well set in its segment because of it brand loyalty they have retained in the south Indian states. Now main focus is to penetrate the North Indian markets by adopting new strategies and also increasing sales from other investment alternative. Comparable peers like Manappuram and other NBFC are trading at price to earnings multiples of 18-23x and MFL is available at 18x.

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