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  • Muthoot Fincorp adopts alternate route of Covered Bonds for fund source

    Published on March 11, 2020

    Muthoot Fincorp Limited, the flagship company of Muthoot Pappachan Group (popularly known as Muthoot Blue) and one of the largest NBFCs in India, today announced the successful closure of INR 125 crores covered bond issuance. Amidst the current environment of credit crunch, MFL has been exploring alternate funding sources through this covered bond issue that opened on March 5, 2020 and two successful Non-Convertible Debentures (NCD) public issues earlier in the current financial year.

    With a CRISIL rating of AA+ (CE), the covered bonds have been issued for a tenure of 28 months at an interest rate of 9.5% per annum payable monthly. With this issue, Muthoot Fincorp would be able to reach mutual funds, pension & PF funds, insurance funds and wealth management funds, thereby helping providing access to cheaper funds and ability to raise long-term on-balance sheet funds. Vivriti Capital is the arranger for the issue.

    Elaborating on the bond issue, Mr. Thomas John Muthoot, Chairman – Muthoot Pappachan Group and Managing Director – Muthoot Fincorp Limited, said, “We are focusing on diversifying our funding sources and reducing the dependence on the traditional credit routes. While covered bond market has a considerable size of around Euro 2.6 trillion globally, it is still in a nascent stage in India with only a handful of issuances till date. This issue enables us to open to a vast market that has appetite for high rated bonds while reinforcing our resilience during the turbulent market conditions. We remain steadfast in our unwavering dedication to empower the common man and find innovative ways to help them in achieving their ambitions.

    Covered bonds are debt securities issued by a bank or financial institution and collateralized against a pool of assets that, in case of failure of the issuer, can cover claims at any point of time. Unlike asset-backed securities created in securitization, the covered bonds continue as obligations of the issuer; in essence, the investor has recourse against the issuer and the collateral, sometimes known as dual recourse.