Muthoot Finance Ltd.

Manipal University, Jaipur

By : VIJAY SHEKHAWATREG NO: 161001148CLASS: BBA A

Introduction of the Company

Incorporated in 1997, Muthoot Finance Ltd. is India’s 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 areasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements.

OVERVIEW :Muthoot Finance was founded by M George Muthoot in 1939. The company has been licensed by Reserve Bank of India under Section 45 I(a) of the RBI Act, 1934 to function as a Non-banking financial company(NBFC) without accepting public deposits.

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The company's gold loan business constitutes more than 99 percent of its total income.

The company has more than 4,050 branches spread across 23 states of the country Muthoot Finance

Muthoot Finance is also the highest credit rated Gold Loan company in India, with a credit rating of AA- (CRISIL) and LAA-(ICRA) for its Long Term Debts and P1+ (CRISIL) & A1+ (ICRA) for its Short Term Debt Instruments.

The company's headquarters are located in Kerala, India, and operates over 4,000 branches throughout the country. Outside India, Muthoot Finance is established in the UK, US, and United Arab Emirates.

MARKETING STRATEGY :

The target market of Muthoot Finance includes small businesses, vendors, farmers, traders, SME business owners, and salaried individuals.

It aims at meeting gold loan requirements ranging from a principle loan amount of Rs. 1500 up to the maximum extent of Rs. 10,000,000 (1 CRORE).

In addition to financing gold transactions, the company offers foreign exchange services, money transfers, wealth management services, travel and tourism services, and sells gold coins

1.GOLD LOAN

2.MONEY TRANSFER

3.FOREIGN EXCHANGE

4.M POWER CARD

5.TRAVELSMART

LOAN APPRAISAL PROCESS :

The amount financed is based on the value of jewellery, valuation of gold jewellery is based on centralised policies and guidelines.

The gold loan approval process is linked with the appraisal of gold jewellery that serves as a collateral

Each of our branches possess trained personnel with experience in

appraising the quality of jewellery

The appraisal process begins by weighing the jewellery using calibrated weighing machines. The jewellery is then subject to prescribed primary tests for gold quality, including stone and acid tests,

followed by additional tests, if required, such as salt tests, sound, weight, pointed scratching, flexibility, colour, smell, usability, magnifying glass and finishing tests

Once the jewellery passes these tests, loans are disbursed, based

on the approved advance rate per gram of gold.

HUMAN RESOURCE MANAGEMENT : At Muthoot Finance, the primary objective of the human

resource function is employee development. The Company offers its 25,351 employees the opportunity to harness their skills and extend frontiers.

The Company added 8,663 employees during the year under review. Induction training was conducted for new recruits at Staff Training College, Kochi, and New Delhi. This training comprised a residential programme covering the Company’s history, policies, processes and products, among others.

Company established Regional Learning Centres in all its 57 Regional Offices.

CORPORATE SOCIAL RESPONSIBILITY :

Towards a better environment Muthoot Group helps protectthe environment through the following initiatives:

Clean City-Green City Marathon: Muthoot Group participated in a Clean City-Green City Marathon by Kochi Municipal Corporation, focusing on effective waste disposal.

‘Horn not OK please’: This initiative by Muthoot Group and the Kochi chapter of CII’s YI (Young Indians) increased attention on vehicular noise pollution.

Donations: Muthoot donated 50 sewing machines to the physically challenged at Edakkara, Calicut.

E-Toilet at Indira Priyadarshini Children’s Park: An award winning etoilet was installed by Eram Scientific Solutions (P) Ltd. At Kochi, incorporating the latest technology in waste management and water conservation.

Cash awards: Muthoot Group established Excellence Awards for the toppers of 200 government schools across seven educational districts in Kerala.

Note book distribution: Muthoot Group distributed 50,000 note books to underprivileged children in Andhra Pradesh, Tamil Nadu and Karnataka.

Distribution of school uniforms: Muthoot Finance distributed school uniforms to needy children in government schools.

DIRECTORS REPORT :

SWOT ANALYSIS OF MUTHOOT FINANCE

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

Market leading position in the Gold Loan business with a strong presence in under-served rural and semi-urban markets Strong capital raising ability

Geographic diversification will aid in business scalability

Gold loan business constituted 98.5% of revenues. So any major decline in gold prices in future can adversely impact the company’s revenue. RBI removed the 'priority sector lending' status to gold loans for the agriculture purpose.

The gold loans market is significantly under-penetrated and is expected to continue growing at the rate of 35-40% in the future. Changing customer attitude and life style

Rising interest rate scenario There are about 7,000

litigation cases against the company. Increased competition from other NBFCs and banks in gold financing business

Annual Interest Scheme Existing Revised with effect from 21.05.2012

Put option waiver Period

General Special Category

Put option waiver Period

General Special Category

12 Months 12% 12.50% 12 Months

and 1 day

12.00%

12.50%

400 Days 12.50% 13.00% 400 days 12.50% 13.00% 18 Months 13.00% 13.50% 18 Months 13.00% 13.50% 24 Months 13.00% 13.50% 24 Months 13.00% 13.50% 30 Months 13.00% 13.50% 30 Months 13.00% 13.50% 36 Months 13.00% 13.50% 36 Months 13.00% 13.50% 60 Months 12.00% 12.50% 60 Months 12.00% 12.50%

Muthoot Doubling Plus Bond Period

Maturity value of Rs.1000 Effective Yield* (p.a.)

66 months 2080 19.63

Loan Scheme Annual Interest Rate(on diminishing balance)

Express 3 Minutes Gold Loan - Daily Interest Scheme

(Available in Kerala only)

24%

Express 3 Minutes Gold Loan - Weekly interest remittance(Outside Kerala)

24 % / 27%( as per the applicable

scheme )

Smart+ Gold Loan (EMI Scheme) 24%

Traders Flexi Gold Loan 24%

Interest Rate structure*