Muthoot Finance Gains After Sri Lankan Acquisition!

Muthoot Finance rose 2.69% to Rs 194.85 at 9:39 IST on BSE after the company said it acquired a 30% stake in Sri Lanka-based Asia Asset Finance for $2.1 million.

The company made the announcement after trading hours on Monday, 25 August 2014.

Meanwhile, the BSE Sensex was down 21.15 points, or 0.08%, to 26,415.87.

On BSE, so far 25,000 shares were traded in the counter, compared with an average volume of 70,407 shares in the past one quarter.

The stock hit a high of Rs 196.75 and a low of Rs 191.50 so far during the day. The stock hit a 52-week high of Rs 221 on 20 May 2014. The stock hit a 52-week low of Rs 89.10 on 3 October 2013.

The stock had outperformed the market over the past one month till 25 August 2014, rising 8.37% compared with 1.19% rise in the Sensex. The scrip had, however, underperformed the market in past one quarter, falling 9.10% as against Sensex’s 7.06% rise.

The mid-cap company has an equity capital of Rs 397.06 crore. Face value per share is Rs 10.

Muthoot Finance acquired 16.77 crore existing equity shares of Asia Asset Finance PLC, Colombo (AAF). This represents 29.98% of total capital of AAF. AAF is a registered financial company based in Sri Lanka and listed in DiriSaviBoard of Colombo Stock Exchange. AAF is in lending business since 1970. At present AAF is involved in retail finance, hire purchase & business loans and has 11 branches across Sri Lanka.

Muthoot Finance is seeking synergies by helping the AAF to operationalize loan against Gold Ornaments in Sri Lanka drawing on the expertise of Muthoot Finance in this field.

Muthoot Finance through this investment expects AAF, to improve its lending operations and profitability in coming years and which may improve value of its present investment in AAF in coming years.

Muthoot Finance acquired 16.77 crore existing equity shares of face value of LKR 1 each of AAF from Asia Capital PLC, a major shareholder of AAF, through Colombo Stock Exchange at total value of LKR 268 million (approximately $2.1 million).

Net profit of Muthoot Finance declined 7.07% to Rs 180.18 crore on 15.5% decline in operating income to Rs 1080.64 crore in Q1 June 2014 over Q1 June 2013.

Muthoot Finance is the largest gold financing company in India in terms of loan portfolio. The company provides personal loans secured by gold jewellery, or gold loans, primarily to individuals who possess gold jewellery but could not access formal credit within a reasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements.