Muthoot Finance offloads Rs 725 crore distressed gold loan portfolio to Arcil

26 Oct 2023 , 03:22 PM

According to two persons familiar with the sources, Muthoot Finance sold a Rs 725 crore gold loan portfolio to Asset Reconstruction Company of India (Arcil) on par.

This is the first time a lender has sold a gold loan portfolio to an asset reconstruction company (ARC). Most lenders choose in-house recovery since the value of gold is sufficient to reimburse the amount issued.

Muthoot did not suffer a substantial haircut since gold prices have risen, and the transaction is structured so that the benefit is split by the Avenue Capital-backed ARC and the financing business.

Muthoot Finance, located in Kerala, sold the gold loan portfolio using a 15:85 structure, in which 15% of the consideration is paid in cash and the remainder in the form of security receipts.

According to an August 28 study by Icra Ratings, Muthoot Finance is a market leader in the gold lending sector, with its gold loan portfolio accounting for about 86% of its consolidated book as of June 30.

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