The Non-Banking Financial Company (NBFC) sector in India plays a crucial role in driving the country’s economic growth by providing a wide range of financial services, such as loans, asset management, insurance, and wealth management. Unlike traditional banks, NBFCs are not allowed to take deposits but offer similar financial products, often focusing on underserved segments of the market.
Prominent players in this sector include Bajaj Finance, known for its consumer lending and diversified financial products; Cholamandalam, a leader in vehicle finance and home loans; and Muthoot Finance, a major player in gold loans and vehicle financing. Over recent years, the sector has witnessed significant growth, driven by rising demand for credit, increasing financial inclusion, and favorable regulatory changes, positioning NBFCs as key contributors to India’s financial ecosystem.
RBI regulations on NBFC
Recent RBI regulations on Non-Banking Financial Companies (NBFCs), particularly regarding small, collateral-free loans, have significantly impacted the sector. These regulations, aimed at curbing overexposure to risky lending, tightened the criteria for offering unsecured loans because there was a surge in Non-Performing Assets (NPAs).
With reduced credit assessments and risk management, many small-ticket loans turned sour, increasing defaults. This, in turn, triggered a rise in NPAs, putting pressure on the financial health of NBFCs and creating wider concerns across the financial ecosystem.
Recent Update
The company has announced plans to raise 11,000 crore Indian rupees through the issuance of non-convertible debentures (NCDs) on a private placement basis. The offering consists of 11,000 rated, listed, unsubordinated, secured, transferable, redeemable NCDs, each with a face value of 100,000 rupees.
Set to be allotted on November 28, the bonds carry a coupon rate of 10.40% per annum and will mature on November 28, 2026. The NCDs are intended to be listed on the Bombay Stock Exchange (BSE), providing investors with an opportunity to trade these bonds in the secondary market.
Share Price
The shares of the company are currently trading at Rs. 343.3 up 1.09% from its previous close of Rs. 339.6 as of November 26, 2024. The stock touched an intraday high of Rs. 345.95.
About the Company
Muthoot Capital Services Limited (MCSL) is a deposit-taking Non-Banking Financial Company (NBFC) and a part of the renowned Muthoot Group, which has built a strong brand presence, especially in South India. With over 30 years of experience in the lending sector, the promoters have established a solid foundation for the company.
MCSL began its journey in 1998 by financing two-wheelers and has since diversified into financing used cars, consumer durables, and small-ticket business loans.
Initially focused on gold loans, MCSL gradually exited this segment as the Muthoot Group expanded its gold financing operations in Muthoot Finance Limited (MFL). The company benefits from a wide distribution network, leveraging MFL’s 3500+ branches and large customer base for loan origination and collections.
Conclusion
Muthoot Capital Services Limited’s strategic move to raise ₹11,000 crore through non-convertible debentures demonstrates its robust financial positioning in the NBFC sector. With a coupon rate of 10.40% and listing on the Bombay Stock Exchange, the bonds offer an attractive investment opportunity.
Leveraging its 30-year experience and extensive distribution network, the company continues to adapt to evolving RBI regulations while maintaining its commitment to diversified lending and financial services across various segments.
Written By: Dipangshu Kundu
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