Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 4.00 ACUITE BBB- | Stable | Assigned -
Bank Loan Ratings 36.00 ACUITE BBB- | Stable | Reaffirmed -
Total Outstanding Quantum (Rs. Cr) 40.00 - -
 
Rating Rationale

Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B Minus) on the Rs. 36.00 crore bank facilities of Mulamoottil Financers Limited (MFL). The outlook is ‘Stable’.
 
Acuité has assigned the long-term rating of ‘ACUITE BBB-’ (read as ACUITE Triple B Minus) on the Rs. 4.00 crore bank facilities of Mulamoottil Financers Limited (MFL). The outlook is ‘Stable’.
 
The rating continues to factor in the experienced promoters, healthy asset quality and comfortable capitalization levels. MFL’s reported a CRAR of 36.78 percent (Tier 1: 24.09 percent) and gearing levels stood steady at 3.07 times as on March 31, 2023. The rating takes into consideration in the company’s lending profile towards secured and liquid gold loans & improvement in disbursal levels. The rating further draws comfort from sound asset quality metrics marked by on time portfolio at 99.53 percent and Gross Non-Performing Assets (GNPA) of 0.33 percent as on March 31,2023.

The rating is however, constrained by geographical concentration, modest scale of operations, limited financial flexibility and highly competitive business of gold loans. Going forward, the company’s ability to raise capital, profitably scale-up its loan portfolio while maintaining the asset quality will be a key monitorable.


About the company
­Mulamoottil Financiers Limited (Formerly Mulamoottil Leaning and Hire Purchase Ltd) a Non- Banking Financial Company (NBFC) incorporated in February 1994 based out of central Travancore area of Kerala mainly operates in providing gold loan and business loans primarily to individuals in rural areas. The company is being promoted by Mr. Jacob Thomas and his family members. The company has expanded its operations in the state of Kerala with a network of 166 branches.
 
MFL is a part of the Mulamoottil Group, the group is also engaged in other businesses like hospitality, finance, retail amongst others.
 
Analytical Approach
­Acuité has considered the standalone financial and business risk profile of MFL to arrive at the rating.
 

Key Rating Drivers

Strength
  • Experienced promoters

The promoters have more than two decades of experience and a strong understanding of customer profile in the region they operate. Given the company’s long track record of presence of more than three decades in the state of Kerala, the company has built up good credibility among the borrowers. The company is promoted by Mr. Jacob Thomas and his family members. He holds ~69 percent of shares individually of MFL as on March 31, 2023, while rest shareholding is held by other family members. Mr. Jacob Thomas, the manging director of the company has long-standing experience in various business & also in financial services. The day-to-day operation of MFL is led by Dr.Ashly Thomas Jacob who is supported by his team of professionals.
Acuité believes that MFL will continue to benefit from its established presence of the Mulamoottil Group and experience of the promoters in the gold loan segment.

 

  • Healthy Asset Quality

Asset quality has shown improvement marked by on time portfolio at 99.53 percent as on March 31, 2023 as against 98.95 percent as on March 31, 2022. MFL reported a Gross NPA stood at 0.33 percent as on March 31, 2023 as against 0.67 percent as on March 31, 2022, and NNPA of 0.17 percent as on March 31, 2023 as against 0.33 percent as on March 31, 2022. The company has provision coverage ratio of 50 percent as on March 31, 2023. The current GNPA and NNPA levels improved from 10.94 percent and 8.52 percent as on March 31, 2020, respectively. The improvement was led by the management’s focus on collection toward delinquent assets.
 
Going forward, the company’s ability to maintain asset quality will be key monitorable and risk arising from adverse gold prices would be critical.

Weakness

Moderate scale of Operations with high geographical concentration

Mulamoottil Financers limited commenced its operation in 1994 and currently has a loan portfolio of Rs. 149.97 Cr. as on March 31, 2023 as against Rs. 104.80 Cr as on March 31, 2022, and Rs. 81.28 Cr in FY2021. MFL is a mid-sized but a stable growing player in gold loans. MFL’s portfolio is currently concentrated in 5 districts of Kerala (i.e Pathanamthitta, Kottayam, Alappuzha, Kollam, Idukki) and has a branch base of 166 branches as on March 31, 2023. Going forward MFL plan to expand its network of branches in the neighbouring states of Kerala. The company's performance is expected to remain exposed to the competitive landscape in these regions and the occurrence of events such as natural calamities, which may adversely impact the credit profile of the borrowers.
 
Acuité believes that geographical concentration will continue to weigh on the company’s credit profile.


Limited Financial Flexibility

The capital structure of MFL is supported by Networth of Rs. 41.11 Cr., Total debt of Rs. 127.69 Cr. and resulted gearing of~3.07 times as on March 31, 2023. MFL borrowing profile comprises non-convertible debentures followed by unsecured non-convertible subordinate debt and facilities from Federal bank and State Bank of India in the form of CC/OD, WCDL, Term Loan facilities. The NCDs are privately placed with friends and family of the promoters for a tenor of 2 to 3 years. As the company has availed banking facility from two banks, the debt profile of MFL remains largely dependent on promoters for funding requirement. The company is in talk with other banks for raising additional funds.
 
Acuite believes that the ability of the company to mobilize additional funding through debt/equity will be critical. 

Rating Sensitivity
  • ­ Ability to raise capital
  • Profitable scale up in operations
  • Movement in liquidity buffers
  • Movement in profitability metric
  • Changes in the regulatory environment
 
Material Covenants
­None
 
Liquidity Position
Adequate
MFL’s overall liquidity profile remains adequate with no negative cumulative mismatches in near to medium term as per ALM dated March 31, 2023. The company has cash & bank balances of Rs. 12.29 Crore as of March 31, 2023.
 
Outlook - Stable
­Acuité believes that MFL will maintain a 'Stable' outlook over the medium term supported by its established presence in the gold loan segment along with experienced promoters and demonstrated ability to maintain asset quality levels. The outlook may be revised to 'Positive' in case of higher than expected growth in loan portfolio while maintaining asset quality and capital structure. The outlook may be revised to 'Negative' in case of any headwinds faced in scaling up of operations or in case of significant deterioration in asset quality and profitability metrics.
 
Other Factors affecting Rating
­None
 
Key Financials - Standalone / Originator
­
Particulars Unit FY23 (Actual) FY22 (Actual)
Total Assets Rs. Cr. 178.13 125.71
Total Income* Rs. Cr. 18.66 13.81
PAT Rs. Cr. 5.55 4.05
Net Worth Rs. Cr. 41.11 35.57
Return on Average Assets (RoAA) (%) 3.65 3.46
Return on Average Net Worth (RoNW) (%) 15.07 12.65
Debt/Equity Times 3.07 2.33
Gross NPA (%) 0.33 0.67
Net NPA (%) 0.17 0.33
*Total income equals to Net Interest Income plus other income.
 
Status of non-cooperation with previous CRA (if applicable):
­None
 
Any other information
­None
 
Applicable Criteria
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Banks And Financial Institutions: https://www.acuite.in/view-rating-criteria-45.htm
• Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.htm
• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm
• Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm

Note on complexity levels of the rated instrument
­In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
06 Dec 2022 Secured Overdraft Long Term 15.00 ACUITE BBB- | Stable (Assigned)
Working Capital Demand Loan Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
Secured Overdraft Long Term 1.00 ACUITE BBB- | Stable (Reaffirmed)
Term Loan Long Term 10.00 ACUITE BBB- | Stable (Assigned)
05 Sep 2022 Working Capital Demand Loan Long Term 10.00 ACUITE BBB- | Stable (Assigned)
Secured Overdraft Long Term 1.00 ACUITE BBB- | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Federal Bank Not Applicable Secured Overdraft Not Applicable Not Applicable Not Applicable 1.00 Simple ACUITE BBB- | Stable | Reaffirmed
State Bank of India Not Applicable Secured Overdraft Not Applicable Not Applicable Not Applicable 15.00 Simple ACUITE BBB- | Stable | Reaffirmed
State Bank of India Not Applicable Term Loan Not available Not available Not available 10.00 Simple ACUITE BBB- | Stable | Reaffirmed
Federal Bank Not Applicable Working Capital Demand Loan (WCDL) Not available Not available Not available 10.00 Simple ACUITE BBB- | Stable | Reaffirmed
Federal Bank Not Applicable Working Capital Demand Loan (WCDL) Not available Not available Not available 4.00 Simple ACUITE BBB- | Stable | Assigned
­

Contacts
Analytical Rating Desk
About Acuité Ratings & Research

Acuité Ratings & Research Limitedwww.acuite.in