Rationale

The ratings factor in Muthoot Finance Limited's (MFL) long-standing track record and its leadership position in the gold loan segment, its established franchise with a pan-India branch network, and its efficient internal controls and monitoring systems. The ratings also consider the company's comfortable capitalisation profile, ability to raise funds from diverse sources and good profitability indicators. ICRA takes note of the Muthoot Group's portfolio diversification initiatives via its subsidiaries. MFL's ability to grow the non-gold loan portfolio profitably would be critical over the medium term as the share of the non-gold business is expected to increase to 20% by March 2023 from 13% in September 2019.