Muthoot FinCorp to dilute minimum 10% stake in IPO: CEO Shaji Varghese

Synopsis

Muthoot FinCorp is preparing for its Initial Public Offering. The company plans to offer at least 10 percent of its stake. Funds raised will fuel business expansion. The gold loan NBFC sees significant growth opportunities in the sector. Muthoot FinCorp is also venturing into MSME lending and digital initiatives.

Gold loan-focused non-banking finance company (NBFC) Muthoot FinCorp is likely to dilute a minimum 10 per cent stake in its proposed initial public offering (IPO), while proceeds from the issue will be used to support growth, a top official of the company said.

The board of Muthoot FinCorp on Saturday approved raising up to Rs 4,000 crore through an IPO comprising a fresh issue of equity shares, subject to regulatory approvals and market conditions.

"As per regulation, also, a minimum of 10 per cent is to be diluted. Beyond that, it will depend on valuation," Shaji Varghese, chief executive officer of Muthoot FinCorp, said in an interview with PTI.

Varghese added that valuation discovery is yet to happen as the company has yet to appoint bankers.

He said the company, which is currently fully owned by the Muthoot family and has no external private equity investors, is raising fresh equity capital for business growth and not for any investor exit.

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"The equity we are raising is for growth. This is growth capital," Varghese said, adding that the company would like to hit the market at the earliest, subject to approvals and market conditions.

However, he declined to provide a timeline for the issue, citing procedural requirements, including appointment of bankers and lawyers, besides multiple regulatory clearances.

Explaining the rationale behind the IPO, Varghese said the company sees strong growth opportunities in the gold loan business amid stable regulations, increasing participation from organised players and greater formalisation of the sector.

According to him, only around 35-40 per cent of the gold loan market is currently with regulated entities, while the rest continues to be serviced by jewellers and local moneylenders.

He added that the environment for gold loan business is becoming more conducive than ever before citing stable regulations, favourable product features and elevated gold prices.

Besides gold loans, Muthoot FinCorp is expanding in MSME lending, loan against property and digital initiatives through partnerships and its platform Muthoot FinCorp One, he added.

On concerns around geopolitical tensions and the West Asia crisis, Varghese said the company has not witnessed any impact on business momentum so far.

"We don't see any de-growth or acceleration in our business. The momentum is business as usual," he said.

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