Muthoot Microfin announces rate cut of 55 bps

31 Jan 2024 , 01:24 AM

Following nearly two years of upward trending lending rates, Muthoot Microfin, the recently listed lender to the bottom of the pyramid segment, has chosen to lower rates by up to 55 basis points on new loans to current clients.

Since the Reserve Bank of India lifted the lending cap on NBFC-MFIs in April 2022 to place them on an equal footing with banks and other non-bank lenders, microfinance rates have increased significantly. After the Covid epidemic, some lenders increased their rates by as much as 450–500 basis points to offset the increased cost of lending.

Over the previous two years, Muthoot Microfin, a division of Kerala’s Muthoot Pappachan group, increased rates by 150 basis points.

We have now made the decision to give our low-risk borrowers the advantage of a lower incremental cost of financing. Sayeed added, ‘We anticipate a rating upgrade as well, which would assist further restrict the cost of capital.

The lender’s cost of funding is 11.2% on average, but during the past six months, it has been able to raise new capital at a significantly lower rate of about 10.4% annually.

Depending on the risk profile of the borrower, its loan rates range from 22.5% to 24.9%. The new rates would be 21.95% at the lower end and 24.65% at the upper end, a 25 basis point decrease.

Depending on the borrower’s risk profile, its loan rates range from 22.5% to 24.9%. The new rates would be 21.95% at the lower end and 24.65% at the upper end, a 25 basis point decrease.

Right now, the weighted average lending rate is 23 %.

Current clients would benefit whenever they took out a new loan.

In order to finance its business expansion, the NBFC-MFI also intends to raise an additional ₹ 300 crore this quarter through non-convertible debentures and around $120 million in external commercial borrowing.

Its gross loan portfolio increased by 38.64% annually to ₹ 11,458 crore, with Tamil Nadu accounting for one-fourth of its activity. Sixteen % of its business is from Kerala.

Tuesday’s closing price for its shares on the BSE was ₹ 254.40, up 8.74% from the day’s peak of ₹ 266.55, on the back of an increase in NIM and a 119% increase in net profit to ₹ 125 crore.

The shares have been under pressure since they were listed on December 26 of last year, when they were priced 5.4% lower than the ₹ 291 IPO price.

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