Muthoot Microfin Raises $75 Mn Via External Commercial Borrowing

Muthoot Microfin (NSE: MUTHOOTMF, BSE: 544055), an Indian microfinance institution, has declared a syndicated social term loan of USD 75 million in the form of an External Commercial Borrowing (ECB). The deal was participated by Standard Chartered Bank, Doha Bank, RakBank (National Bank of Ras Al Khaimah), Union Bank of India (UK), and Canara Bank, GIFT City.

Standard Chartered Bank was the sole arranger of the funds and acted as the Social Loan Coordinator for the transaction helping Muthoot Microfin put in place a Social Financing framework which carries a Second Party Opinion from S&P Global. The USD 75 mn social loan facility has a greenshoe option of USD 25 million and the funds raised will be utilised for on-lending and financing of eligible social loans.

The loan has been tied up for a 3-year and 3-month tenor and benchmarked to a 3-month Term SOFR (Secured Overnight Financing Rate) with a margin of 2.85 per cent, which will be serviced at a quarterly frequency. The facility is fully hedged for principal and interest without any forex risk to the company. Additional banks are expected to join later through the greenshoe portion.

Muthoot Microfin's first large External Commercial Borrowing comes with a flexible drawdown option scheduled for the first quarter of the next financial year. This milestone facility forms a crucial part of its diversification strategy, aligning with the Reserve Bank of India's (RBI) heightened emphasis on diversifying Non-Banking Financial Companies' (NBFC) funding sources.

The long-term nature of this funding not only enhances the company’s Asset and Liability Management (ALM) position but also significantly reduces the cost of fund. Leveraging the Secured Overnight Financing Rate (SOFR) for funding ensures a cost advantage over domestic bank funding.

Sadaf Sayeed, chief executive officer (CEO), of Muthoot Microfin said, “We are proud to declare this ECB and are grateful to all the participants for their positive response. This development enables us to not only diversify our source of funds but also create and sustain an attractive position in the international market. The ECB will further our business objectives as we plan to utilise the fund towards facilitating microfinance loans across geographies. This strategic move not only opens avenues for international partnerships but also introduces the MFI sector to diverse international banking entities across different geographies.”