Established market position in gold financing, supported by extensive experience of the promoters

MFL has established market position in the gold financing. The promoters have spent over seven decades in the business of lending against gold jewellery. Over the years, the group has established a strong reputation and brand in South India and has an appropriate assessment and underwriting methodology.

Diversified product profile of the MPG group

MPG has diversified its product profile over the past few years. Currently, the group operates in five major segments: loan against gold jewellery, two-wheeler finance, microfinance, housing finance and small business loans. Overall managed AUM of MPG is around Rs 33,332 crore as on June 30, 2023 (Rs 31,587 crore as on March 31, 2023). The proportion of gold loans has remained high at 56% in June 2023. The microfinance portfolio is the second largest with around 30% of overall portfolio of the group as on June 30, 2023. CRISIL Ratings believes that the gold loans will continue to hold the largest share in the consolidated AUM

$Improvement in capitalisation with the recent infusion

MFLu2019s networth, at standalone level, stood at Rs 4,264 crore (including CCCPS) as on June 30, 2023 as against Rs 4,050 crore as on March 31, 2023. Capitalisation is further supported by low asset-side risks (security of gold jewellery, which is liquid and in the lenderu2019s possession). On a consolidated level, networth stood at Rs 4,904 crore (including CCCPS) as on March 31, 2023, against Rs 4,271 crore as on March 31, 2022 which was bolstered by $50 million in MML by a PE investor Greater Pacific Capital in fiscal 2022 and $10 million in September 2022. Moreover, net gearing (adjusted for cash and real estate assets) at the standalone level stood at 4.2 times in fiscal 2023 as compared to 4.8 times in fiscal 2022 and at consolidated level improved to 5.8 times in fiscal 2023 as compared to 6.0 times in fiscal 2022

Healthy asset quality in the gold loan segment to support overall group asset quality

The gross NPAs for MFL stood at 2.9% as of June 30, 2023 as compared to 2.1% in March 31, 2023. Further there is a negligible impact of the Reserve Bank of India (RBI) clarification released in November 2021 on the NPAs as gold loans are demand loans where the interest and principal amount are due for payment at the end of tenor. However, CRISIL Ratings notes that due to asset quality issues and the pandemic, the company, incrementally, has reduced its exposure to the SME segment and has started focusing primarily on gold loan products.