Aarti Finals

download Aarti Finals

of 63

Transcript of Aarti Finals

  • 8/10/2019 Aarti Finals

    1/63

    PROJECT REPORT ON

    ASSET AND LIABILITIES MANAGAMENT IN

    MUTHOOT FINCORP, NIZAMABAD

    Project Report submitted to Jawaharl al Nehru Technological

    Un iversi ty, H yderabad,

    In partial fulfillment of the requirements for the award of the degree of

    MASTER OF BUSINESS ADMINISTRATIONSubmitted by:

    Mr./Ms._____________________________

    H.T.No._____________________________ Under the esteemed guidance of

    Mr./Ms._________________________

    Associate/Assistant Professor

    DEPARTMENT OF BUSINESS MANAGEMENT

    VIJAY RURAL ENGINEERING COLLEGE, NIZAMABAD

    (Approved by AICTE, New Delhi and Affiliated to JNTU Hyderabad)

    2012-2014

  • 8/10/2019 Aarti Finals

    2/63

    DECLARATION

    I hereby declare that the work described in this project entitled -----------------

    ------------------------------------------------- carried out at ----------------------------

    ------- . which is being submitted by me in partial fulfillment for the award o f

    degree of Master of Business Administration in the Dept. of Business

    Management ,Vijay Rural Engineering College , Nizamabad to the

    Jawaharlal Nehru Technological University Hyderabad, Kukatpally,

    Hyderabad (Telanagana.) -500 085, is the result of investigations carried out

    by me under the Guidance of Mr./Ms. --------------------------------------------.

    The work is original and has not been submitted in full /partial for any

    Degree/Diploma of this or any other university or institution.

    Place: SignatureDate:

    Name of the Candidate:

    Hall Ticket No.:

    Email-Id:

  • 8/10/2019 Aarti Finals

    3/63

    COMPANY CERTIFICATE

  • 8/10/2019 Aarti Finals

    4/63

    CERTIFICATE

    This is to certify that the project report entitled CUSTOMER RELTIONSHIP

    MANAGEMENT BIG BAZAR is being submitted by Mr ./Ms.-------------------------------(H.T.No. ------------------) in partial fulfillment for the award of the Masters Degree in

    Business Administration (MBA) during the academic year 2014 to the JNTUH is a

    recorded of bonafide work carried out by him/her under the guidance and

    supervision.

    The results embodies in this project have not been submitted to any other

    university or institute for the award of any degree or diploma.

    Signature of the Internal guide Signature of the HOD

    ( ) ( )

    Signature of the External Examiner Signature of the Principal

    (Dr.B.R.VIKRAM)

  • 8/10/2019 Aarti Finals

    5/63

    ACKNOWLEDGEMENT

    I take this opportunity to thank all who have rendered their full support

    to my work. The pleasure, the achievement, the glory, the satisfaction, the

    reward, the appreciation and the construction of our project cannot be thought

    without a few, how apart from their regular schedule, spared a valuable time

    for us. This acknowledgement is not just a position of words but also an

    account of the indictment. They have been a guiding light and source of

    inspiration towards the completion of the project.

    I would like to express my hearted thanks to Mr. K.Narendhar

    Reddy Garu Chairman, Mrs. Amrutha Latha Garu, Secretary and Dr.

    B.R.Vikram Garu, Principal- Vijay Rural Engineering College for their kind

    consent to carry out this project and also providing necessary infrastructure

    and resources to accomplish my project work.

    I express my profound sense of gratitude to Mr.---------------------------,

    Associate Professor & Head of the Department of MBA, who has kindly permitted me to do major project in any area of my choice and providing me

    all the facilities for the project.

    I am deeply indebted to my project guide Mr. ----------------------------,

    Assistant Professor in Department of MBA for his valuable guidance,

    meticulous supervision, support and sincere advice to complete the project

    successfully.

    And I would like to express my sincere thanks to all the staff members

    of MBA Department for their kind cooperation in completion of this project.

    Finally, I thank to one and all those who have rendered help directly or

    indirectly at various stages of the project and also my family members for

    their care and moral support in finishing my project.

    STUDENT NAME

    H.T.NO

  • 8/10/2019 Aarti Finals

    6/63

    ABSTRACT

  • 8/10/2019 Aarti Finals

    7/63

    INDEX

  • 8/10/2019 Aarti Finals

    8/63

    LIST OF TABLES

  • 8/10/2019 Aarti Finals

    9/63

    INTRODUCTION

    Asset Liability Management (ALM) is a strategic approach of managing the balance sheet dynamics in such a way that the net earnings are maximized.

    This approach is concerned with management of net interest margin to ensure

    that its level and riskiness are compatible with the risk return objectives.

    If one has to define Asset and Liability management without going into

    detail about its need and utility, it can be defined as simply management of

    money which carries value and can change its shape very quickly and has an

    ability to come back to its original shape with or without an additional growth.

    The art of proper management of healthy money is ASSET AND

    LIABILITY MANAGEMENT (ALM)

    The Liberalization measures initiated in the country resulted in revolutionary

    changes in the sector. There was a shift in the policy approach from the

    traditionally administered market regime to a free market driven regime. This

    has put pressure on the earning capacity of co-operative, which forced them to

    foray into new operational areas thereby exposing themselves to new risks. As

    major part of funds at the disposal from outside sources, the management is

    concerned about RISK arising out of shrinkage in the value of asset, and

    managing such risks became critically important to them. Although co-

    operatives are able to mobilize deposits, major portions of it are high cost

    fixed deposits. Maturities of these fixed deposits were not properly matched

    with the maturities of assets created out of them. The tool called ASSET AND

    LIABILITY MANAGEMENT provides a better solution for this.

    ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management

    of assets and liability of an organization. This is a method of matching various

    assets with liabilities on the basis of expected rates of return and expected

    maturity patter n

    In the context of ALM is defined as a process of adjusting s liability to meet

    loan demands, liquidity needs and safety requirements. This will result in

  • 8/10/2019 Aarti Finals

    10/63

    optimum value of the same time reducing the risks faced by them and

    managing the different types of risks by keeping it within acceptable levels.

    RBI revises asset liability management guidelines

    February 6/2012In the era of changing interest rates, Reserve Bank of

    India (RBI) has now revised its Asset Liability Management guidelines. Banks

    have now been asked to calculate modified duration of assets (loans) and

    liabilities (deposits) and duration of equity.

    This was stated by the executive director of RBI, V K Sharma, and here

    today. He said that this concept gives banks a single number indicating the

    impact of a 1 per cent change of interest rate on its capital, captures the

    interest rate risk, and can thus help them move forward towards assessment of

    risk based capital. This approach will be a graduation from the earlier

    approach, which led to a mismatch between the assets and liabilities.

    The ED said that RBI has been laying emphasis that banks shouldmaintain a more realistic balance sheet by giving a true picture of their non

    performing assets (NPAs), and they should not be deleted to show huge

    profits. Though the banking system in India has strong risk management

    architecture, initiatives have to be taken at the bank specific level as well as

    broader systematic level. He also emphasized on the need for sophisticated

    credit-scoring models for measuring the credit risks of commercial and

    industrial portfolios.

    Emphasizing on a need for an effective control system to manage risks,

    he said that the implementation of BASEL II norms by commercial banks

    should not be delayed. He said that the banks should have a robust stress

    testing process for assessment of capital adequacy in wake of economic

    downturns, industrial downturns, market risk events and sudden shifts in

    liquidity conditions. Stress tests should enable the banks to assess risks more

    accurately and facilitate planning for appropriate capital requirements.

  • 8/10/2019 Aarti Finals

    11/63

    Especially among financial conglomerates. He said that RBI has already put in

    place a framework for oversight of financial conglomerates, along with SEBI

    and IRDA. He also said that at the systematic level efforts are being made to

    create an enabling environment for all market participants in terms of

    regulation, infrastructure and instruments.

    NEED AND IMPORTANTS OF THE STUDY

    The need of the study is to concentrates on the growth and performance of

    MUTHOOT FINCORP and to calculate the growth and performance by using

    asset and liability management and to know the management of

    nonperforming assets.

    To know financial position of MUTHOOT FINCORP

    To analyze existing situation of MUTHOOT FINCORP

    To improve the performance of MUTHOOT FINCORP

    To analyze competition between MUTHOOT FINCORP with othercooperatives.

    SCOPE OF THE STUDY

    In this study the analysis based on ratios to know asset and liabilities

    management under MUTHOOT FINCORP and to analyze the growth and

    performance of MUTHOOT FINCORP by using the calculations under asset

    and liability management based on ratio.

    Ratio analysis

    Comparative statement

    Common size balance sheet.

  • 8/10/2019 Aarti Finals

    12/63

    GEOGRAPHICAL SCOPE :-

    The same problem was with the all other branches of MUTHOOT FINCORP even out of the NIZAMABAD city. The mana gement is conduc ting

    the same research on a big ground while my contribution is tiny.

    Though my sample size and geographical area was defined and

    confine to a parti cul ar te rri tory but the application of output from the

    research are going to be wide.

    PRODUCT SCOPE:-

    Studying the increasing business scope. Market segmentation to find the potential customers. To study how the various products are positioned in the market. Corporate marketing of products. Customers perception on the various products

    OBJECTIVES OF THE STUDY

    To study the concept of ASSET & LIABLITY MANAGEMENT in

    MUTHOOT FINCORP

    To study process of CASH INFLOWS and OUTFLOWS in MUTHOOT

    FINCORP

    To study RISK MANAGEMENT under MUTHOOT FINCORP

    To study RESERVES CYCLE of ALM under MUTHOOT FINCORP

    To study FUNCTIONS AND OBJECTIVES of ALM committee.

  • 8/10/2019 Aarti Finals

    13/63

    METHODOLOGY OF THE STUDY

    The study of ALM Management is based on two factors.

    1. Primary data collection.

    2. Secondary data collection

    PRIMARY DATA COLLECTION:

    The sources of primary data were

    The chief manager ALM cell Department Sr. manager financing & Accounting System manager- ALM cell

    Gathering the information from other managers and other officials of the

    organization.

    SECONDARY DATA COLLECTION:

    Collected from books regarding journal, and management containing

    relevant information about ALM and Other main sources were

    Annual report of the MUTHOOT FINCORP Published report of the MUTHOOT FINCORP RBI guidelines for ALM.

    LIMITATION OF THE STUDY

    This subject is based on past data of MUTHOOT FINCORP

    The analysis is based on structural liquidity statement and gap analysis.

    The study is mainly based on secondary data.

    Approximate results: The results are approximated, as no accurate data is

    Available.

  • 8/10/2019 Aarti Finals

    14/63

    Study takes into consideration only LTP and issue prices and their difference

    for Concluding whether an issue is overpriced or under priced leaving other.

    The study is based on the issues that are listed on NSE only.

    ASSET LIABILITY MANAGEMENT (ALM) SYSTEM

    Asset-Liability Management (ALM) can be termed as a risk management

    technique designed to earn an adequate return while maintaining a comfortable

    surplus of assets beyond liabilities. It takes into consideration interest rates,

    earning power, and degree of willingness to take on debt and hence is also

    known as Surplus Management.

    But in the last decade the meaning of ALM has evolved. It is now

    used in many different ways under different contexts. ALM, which was

    actually pioneered by financial institutions and banks, are now widely being

    used in industries too. The Society of Actuaries Task Force on ALMPrinciples, Canada, offers the following definition for ALM: "Asset Liability

    Management is the on-going process of formulating, implementing,

    monitoring, and revising strategies related to assets and liabilities in an attempt

    to achieve financial objectives for a given set of risk tolerances and

    constraints."

  • 8/10/2019 Aarti Finals

    15/63

    Basis of Asset-Liability Management

    Traditionally, banks and insurance companies used accrual system ofaccounting for all their assets and liabilities. They would take on liabilities -

    such as deposits, life insurance policies or annuities. They would then invest

    the proceeds from these liabilities in assets such as loans, bonds or real estate.

    All these assets and liabilities were held at book value. Doing so disguised

    possible risks arising from how the assets and liabilities were structured.

  • 8/10/2019 Aarti Finals

    16/63

    REVIEW OF LITERATURE

    Paper Title:-Sovereign Risk and Asset and Liability

    Management Conceptual Issues (SRALM)

    Authour : - G. Papaioannou, and Author Iva Petrova(2000)

    Findings:- Country practices towards managing financial risks on a sovereign

    balance sheet continue to evolve. Each crisis period, and its legacy on

    sovereign balance sheets, reaffirms the need for strengthening financial risk

    management. This paper discusses some salient features embedded in in the

    current generation of sovereign asset and liability management (SALM)

    approaches, including objectives, definitions of relevant assets and liabilities,

    and methodologies used in obtaining optimal SALM outcomes. These

    elements are used in developing an analytical SALM framework which could

    become an operational instrument in formulating asset management and

    debtor liability management strategies at the sovereign level. From a portfolio

    perspective, the SALM approach could help detect direct and derived

    sovereign risk exposures. It allows analyzing the financial characteristics of

    the balance sheet, identifying sources of costs and risks, and quantifying the

    correlations among these sources of risk. The paper also outlines institutional

    requirements in implementing an SALM framework and seeks to lay the

    ground for further policy and analytical work on this topic.JEL

    Paper Title: - Integrating Asset-Liability Risk Management with

    Portfolio Optimization for Individual Investors II (IALRM)

    Author: - Travis L. Jones, Ph.D.(2002)

    Findings: - A majority of private client practitioners rely on mean-variance

    optimization (MVO), rules of thumb, or model portfolios for making asset

    allocation recommendations. Considerations for income levels and other

    constraints figure into the typical approach. However, not enough attention is

  • 8/10/2019 Aarti Finals

    17/63

    given to the nature of an investors multiple time horizons and implications for

    cash flows. These are the future demands placed upon the portfolio. The risks

    that these demands will not be met need to be clearly understood in order to

    validate any asset allocation decision. This study presents an approach of

    incorporating MVO within a multi-horizon, asset-liability Management risk

    model. This approach allows for cash-flow matching of a portion of an

    investors portfolio within the optimization framework. This allows an

    individuals portfolio to provide short-term cash flow, as needed, while also

    considering the longer-term demands on the portfolio.

    Part Title: - Asset & liability management (ALM) modeling with risk

    control by stochastic dominance.

    Author name: - Xi Yang, Jacek Gondzi & Andreas Grothey(2001)

    Findings:- An Asset Liability Management model with a novel strategy for

    controlling the risk of underfunding is presented in this article. The basic

    model involves multi-period decisions (portfolio rebalancing) and deals withthe usual uncertainty of investment returns and future liabilities. Therefore, it

    is well suited to a stochastic programming approach. A stochastic dominance

    concept is applied to control the risk of underfunding through modeling a

    chance constraint. A small numerical example and an out-of-sample back test

    are provided to demonstrate the advantages of this new model, which includes

    stochastic dominance constraints, over the basic model and a passive

    investment strategy. Adding stochastic dominance constraints comes with a price. This complicates the structure of the underlying stochastic program.

    Indeed, the new constraints create a link between variables associated with

    different scenarios of the same time stage. This destroys the usual tree

    structure of the constraint matrix in the stochastic program and prevents the

    application of standard stochastic programming approaches, such as (nested)

    Benders decomposition and progressive hedging. Instead, we apply a

    structure-exploiting interior point method to this problem. The specialized

    interior point solver, object-oriented parallel solver, can deal efficiently with

  • 8/10/2019 Aarti Finals

    18/63

    such problems and outperforms the industrial strength commercial solver

    CPLEX on our test problem set. Computational results on medium-scale

    problems with sizes reaching about one million variables demonstrate the

    efficiency of the specialized solution technique. The solution time for these

    non-trivial asset liability models appears to grow sub linearly with the key

    parameters of the model, such as the number of assets and the number of

    realizations of the benchmark portfolio, which makes the method applicable to

    truly large-scale problems.

    Paper Title: - An investigation of asset liability managementpractices in Kenya Commercial MUTHOOT FINCORP (IALM)

    Author :- Macharia, & Irungu Peter(2003)

    Findings:-

    Risk management practices in commercial MUTHOOT FINCORP are commonly

    known as asset liability management and it remains critical in ensuring safety of

    depositors' funds as well as investors' stake. Asset liability management is a

    requirement by the Central MUTHOOT FINCORP of any country in order to ensure

    full compliance to the set risk management guidelines. This study was designed to

    establish the asset/liability management practices by Commercial MUTHOOT FIN

    CORP in Kenya and to find out the extent of asset-liability management by these

    MUTHOOT FINCORP. The study will be important to commercial MUTHOOT FIN

    CORP, scholars and it will contribute more knowledge to the existing information on

    asset liability management. The population under study comprised of all Heads ofTreasury Operations of the 43 Commercial MUTHOOT FINCORP in Kenya. Census

    study was used because the population was relatively small for sampling and gave a

    better representation of the various risk management practices employed by various

    commercial MUTHOOT FINCORP as well as their asset liability management

    practices. Each respondent filled and submitted a self administered questionnaire that

    was dropped and picked later. The questionnaire responses were summarized and the

    results analyzed using Statistical data analysis programme (SPSS) to describe the

    relationship between the dependent and the independent variables. Findings were presented by way of charts, graphs and tables. Several deductions were drawn from

  • 8/10/2019 Aarti Finals

    19/63

    the findings. These included: responding MUTHOOT FINCORP employed both

    conventional and MUTHOOT FINCORP-specific asset liability management

    practices. Most MUTHOOT FINCORP considered credit/default risk to be the most

    critical of all financial risk exposures though some empirical evidence shows that

    foreign exchange risk is the most critical risk for most firms. Majority of the

    MUTHOOT FINCORP did not find the Kenyan currency market to be information

    efficient: speculation and forecasting techniques were extensively used by most of

    them. Regular and systematic appraisal of asset/liability management policies was a

    common practice amongst most MUTHOOT FINCORP. Most MUTHOOT FIN

    CORP also indicated that their asset/liability management systems were governed by

    guidelines set by the management board which is a cross functional outfit covering all

    the major functions in the MUTHOOT FINCORP this showed that ALM is a highly

    strategic issue in the MUTHOOT FINCORP Most MUTHOOT FINCORP, regardless

    of their size, extensively utilized most of the conventional hedging instruments.

    Micro hedge approach, accounting and economic exposure measurement strategies,

    natural hedging and diversification were some of the most utilized strategies. Some

    hedging practices were considered by most MUTHOOT FINCORP to be more

    important than others. These included use of forward contracts and foreign currency

    options as hedging instruments, and use of matching/natural hedging strategy.

    Paper Title:- Industry - with Asset Liability Management in

    Indian MUTHOOT FINCORP special reference to Interest

    Rate Risk Management to others.

    Author: - Dr. B. Charumathi

    Findings:-

    Assets and Liabilities Management (ALM) is a dynamic process of planning,

    organizing, coordinating and controlling the assets and liabilities their mixes,

    volumes, maturities, yields and costs in order to achieve a specified Net Interest

    Income (NII). The NII is the difference between interest income and interest expenses

    and the basic source of MUTHOOT FINCORP profitability. The easing of controls

    on interest rates has led to higher interest rate volatility in India. Hence, there is a

    need to measure and monitor the interest rate exposure of Indian MUTHOOT FIN

  • 8/10/2019 Aarti Finals

    20/63

    CORP. This paper entitled A Study on the Assets and Liabilities Management

    (ALM) Practices with special reference to Interest Rate Risk Management at

    MUTHOOT FINCORP is aimed at measuring the In terest Rate Risk in

    MUTHOOT FINCORP by using Gap Analysis Technique. Using publicly available

    information, this paper attempts to assess the interest rate risk carried by the

    MUTHOOT FINCORP in March 2005, 2006, & 2007. The findings revealed that the

    MUTHOOT FINCORP is exposed to interest rate risk .Index Terms Interest

    volatility, risk, Indian MUTHOOT FINCORP

    Paper Title: - Optimal Asset Allocation in Asset Liability

    Management

    Author:- Jules H. van Binsbergen, Michael W. Brandt

    Findings:-

    We study the impact of regulations on the investment decisions of a defined benefits

    pension plan. We assess the influence of ex ante (preventive) and ex post (punitive)

    risk constraints on the gains to dynamic, as opposed to myopic, decision making. Wefind that preventive measures, such as Value-at-Risk constraints, tend to decrease the

    gains to dynamic investment. In contrast, punitive constraints, such as mandatory

    additional contributions from the sponsor when the plan becomes underfunded, lead

    to very large utility gains from solving the dynamic program. We also show that

    financial reporting rules have real effects on investment behavior. For example, the

    current requirement to discount liabilities at a rolling average of yields, as opposed to

    at current yields, induces grossly suboptimal investment decisions.

    Paper Title: IMPORTANCE OF ASSET AND LIABILITY

    MANAGEMENT IN THE NIGERIA MUTHOOT FINCORP

    INDUSTRY (A CASE STUDY OF EQUITY MUTHOOT FIN

    CORP LIMITED)

  • 8/10/2019 Aarti Finals

    21/63

    Authors :- faloye and andrew

    Findings:-

    This study examines the extent to which Asset and Liability management is crucial to

    the existence and survival of a MUTHOOT FINCORP. MUTHOOT FINCORP is

    confidence driven and the extent to which this confidence is secured and retained

    depends on the efficiency with which MUTHOOT FINCORP asset and liabilities are

    managed to the satisfaction of the various constituencies that the MUTHOOT

    FINCORP serves viz: Depositors, Borrowers, Shareholders, Regulatory Authorities

    and the Community. The scope of this survey is an in-depth study of the Assets andLiabilities Management in Equity MUTHOOT FINCORP of Nigeria Limited in the

    years before re-structure (1993 to 1995) and after the re-structure (1996 to 1998). The

    survey will be limited to select Heads of Department and above. The survey would

    also cover both the surviving members of the Equity MUTHOOT FINCORP, the

    restructuring management from Nigerian Intercontinental Merchant MUTHOOT

    FINCORP Limited and new members of staff after the restructure. It was found out

    that the crisis of confidence in the financial system and its illiquidity is traced to the

    macro-economic and political problems of the country. Government's unsuccessful

    attempt to arrest the above through various measures as well as the massive looting of

    the treasury led to high loan defaults and exacerbated the financial crisis and the

    resulting mass liquidation of financial Institutions and commercial MUTHOOT

    FINCORPs did not properly address the problem of effective Asset and liability

    management and this triggered off the MUTHOOT FINCORP failures already

    witnessed. It can therefore be concluded that effective asset and liability management

    is critical factor in a commercial MUTHOOT FINCORP. It is of utmost necessity that

    good asset and liability management policies should be in place in a capitalist society

    to mobilize available resources (liabilities) and divert them to profitable instruments

    (assets) to achieve MUTHOOT FINCORP viability and growth: Inefficient Asset and

    Liability Management could result in MUTHOOT FINCORP failure.

    Paper title:-A Financial assets and liabilities management

    support system

    Author : - Yung-Hsin Wang, Ta-Hua Kuo

  • 8/10/2019 Aarti Finals

    22/63

    Findings:-

    This paper describes the design and implementation of a decision support system(DSS) based on the fund dispatching decision viewpoint from the financial division of

    a business group. An integrated data warehouse is established and the technique of

    online analytical processing (OLAP) is applied to analyze daily transaction data of an

    enterprise resource planning system with determined management goal. We adopt the

    Business Dimensional Lifecycle approach to accomplish the system design and

    development. The DSS system developed is to provide latest and timely information

    of financial asset and liability positions in each company within the case business

    group so that decision makers can have a clear decision support in fund dispatching.

    While most related researches on fund dispatching focused especially on efficient

    MUTHOOT FINCORP capital management and few studies were done for general

    financial department of traditional enterprise let alone for the business group, this

    study has made a progress in this issue and the resultant system is applicable to the

    similar business group .the interest rate changing adversely, this in turn protects the

    owner's equity of the MUTHOOT FINCORP. We use seven-day's reacquired interest

    rate data to estimate the frequency distribution of the fluctuation of the future

    market rate and solved the problem to describe the fluctuation of the interest

    rate with multi-factors.

  • 8/10/2019 Aarti Finals

    23/63

    PROFILE OF INDUSTRY & COMPANY

    Muthoot Finance Ltd. is the largest player in the gold loan business in

    India. 76% of its business is generated from the 5 southern states in the

    Country. The Company has a market share of 19.5% in the organized sector as

    on FY10. It is facing major legal hurdle related to Kerala State Money lender

    Act which, if implemented will substantially reduce the profitability of the

    Company as Kerala accounts to 24% of Companys business. Moreover, there

    is a good probability for gold price to get corrected after this prolonged bull

    run which may reduce the ticket size of the loans, leading to a drop in growthand associated profitability. We are quite bullish on the growth potential of

    this firm but we would like to avoid the scrip until the abovementioned factors

    are sorted out and the scrip is available at a deep discount.

    INTRODUCTION OF THE MUTHOOT FINANCE LTD

    Incorporated in 1997, Muthoot Finance Ltd. is Indias largest gold loan

    Company. It is a subsidiary of Muthoot Group which is headquartered atKochi, India. It provides personal and business 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. It has the largest branch network among gold loan providers in

    India with 1921 branches and a strong presence in the underserved rural and

    semi-urban markets. In 2010, it received a fund infusion of Rs.250 cr. from

    private equity players like Baring India Private Equity, Matrix Partners India,

    Kotak India Private Equity Fund and Well come Trust for a 6% stake in the

    Company. In 2011, well comes Trust picked up an additional 1% stake from

    the promoters, taking the total stake of private equity investors to 7%.

  • 8/10/2019 Aarti Finals

    24/63

    HISTORY - MUTHOOT FINANCE LTD

    Our Company was originally incorporated as a private limited

    company on March 14, 1997 with the name The Muthoot Finance Private

    Limited under the Companies Act. Subsequently, by fresh certificate of

    incorporation dated May 16, 2007, our name was changed to Muthoot

    Finance Private Limited. The Company was converted into a public limited

    company on November 18, 2008 with the name Muthoot Finance Limited

    and received a fresh certificate of incorporation consequent upon change in

    status on December 02, 2008 from the RoC.

    Merger with Muthoot Enterprises Private Limited Our Company, along

    with Muthoot Enterprises Private Limited, filed a composite scheme of

    arrangement bearing C.P. Nos. 48 and 50 of 2004 under the Companies Act

    before the High Court of Kerala (Scheme of Amalgamation). The Scheme of

    Amalgamation was approved by the board of directors of our Company

    through the board resolution dated April 28, 2004.

    Pursuant to the approval of the Scheme of Amalgamation by the HighCourt of Kerala by an order dated January 31, 2005, Muthoot Enterprises

    Private Limited was merged with our Company, with effect from March 22,

    2005 and the High Court of Kerala had instructed all the parties to comply

    with the statutory and other legal requirements to make the Scheme of

    Amalgamation effective.

    The company on March 22, 2005 filed a certified copy of the order ofthe High Court of Kerala with the RoC. With the successful implementation of

    the Scheme of Amalgamation, the undertaking of Muthoot Enterprises Private

    Limited along with its assets and liabilities was transferred to and vested in

    our Company.

  • 8/10/2019 Aarti Finals

    25/63

    KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR

    1. 2001 RBI license obtained to function as an NBFC.

    2. 2004 Obtained highest rating of F1 from Fitch Ratings for short term debt

    of Rs. 200 million.

    3. 2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500

    million.

    4. Merger of Muthoot Enterprises Private Limited with the Company

    5. 2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short

    term debt of Rs. 400 million.

    6. 2007 Retail loan portfolio of the Company crosses Rs. 10 billion.

    7. RBI accords status of Systemically Important ND-NBFC.

    8. Branch network of the Company crosses 500 branches.

    9. Net owned funds of the Company crosses Rs. 1 billion.

    10. 2008 Net owned funds of the Company crosses Rs. 2 billion.

    11. Retail loan and debenture portfolio crosses Rs. 20 billion and Rs. 10

    billion respectively.

    12. F1 rating obtained from Fitch Ratings affirmed with an enhanced short

    term debt of Rs. 800 million.

    13. Overall credit limits from lending banks crosses Rs. 5 billion.

    14. Conversion of the Company into a public limited company.

    15. Fresh RBI license obtained to function as an NBFC without accepting

    public deposits, consequent to change in name.

    16. 2009 Retail loan and debenture portfolio crosses Rs. 30 billion and Rs. 15

    billion respectively.

    17. Net owned funds of the Company crosses Rs. 3 billion.

  • 8/10/2019 Aarti Finals

    26/63

    18. Gross annual income crosses Rs. 5 billion.

    19. Overall credit limits from lending banks crosses Rs. 10 billion.

    20. 2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20

    billion respectively.

    21. Net owned funds of the Company crosses Rs. 4 billion.

    22. Overall credit limits from lending banks crosses Rs. 20 billion.

    23. ICRA assigns A1+ rating for short term debt of Rs. 2 billion.

    24. CRISIL assigns P1+ rating for short term debt of Rs. 4 billion.

    25. Branch network of the Company crosses 1,000 branches.

    26. Demerger of the FM radio business into Muthoot Broadcasting Private

    Limited.

    27. Private equity investment of an aggregate of Rs. 1,575.45 million from

    Matrix Partners India Investments, LLC and Baring India Private Equity Fund

    III Limited.

    Corporate history

    The Group traces its business roots to 1887 from patron founder Ninan Mathai

    Muthoot. The Group is named after Mr. Mathew M Thomas (popularly known

    as Muthoot Pappachan). It started with retail provisions business and then

    moved into chits, finance against gold and other financial services . MPG has

    diversified into other businesses including hospitality , real estate , automotive

    dealerships, health and alternate energy .

    Financial Services

    Muthoot Pappachan Group has multiple companies under its financial services

    vertical. These include:

    http://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Retailhttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Alternate_energyhttp://en.wikipedia.org/wiki/Alternate_energyhttp://en.wikipedia.org/wiki/Alternate_energyhttp://en.wikipedia.org/wiki/Alternate_energyhttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Hospitalityhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Retail
  • 8/10/2019 Aarti Finals

    27/63

    Muthoot Fincorp

    Muthoot Fincorp Limited is a proactive Systemically Important Non-Deposit

    Taking Non-Banking Finance Company (NBFC) registered with the Reserve

    Bank of India . The company is a mass provider of finance against gold and

    other loans, with over 2600 branches pan India and has an average of 50,000

    walk in customers per day. and now mpg has more than 3700 branches across

    the india MFL netted a revenue of INR 15070 Million, with a profit of INR

    2990 Million for FY 2011-12 .[1]

    Muthoot Capital Services Muthoot Capital Services Limited primarily offers vehicle loans, including

    two-wheeler & three-wheeler loans. It has established its base in the rural and

    semi-urban areas of South India and has ventured into other states like

    Maharashtra, Gujarat and Goa. MCSL is listed on the Bombay Stock

    Exchange with revenue of INR 670 Mio and a profit of INR 155 Mio for FY

    2011-12 .[2]

    Muthoot Housing Finance Company

    Muthoot Housing Finance Company is an emerging home financier in India

    for the lower and middle income segment and MPG plans to invest INR 1000

    Mio in this venture in the near future. The company plans to set up 25

    branches initially for the housing finance business and also leverage the

    strength of the Groups existing base of over 1.5 million gold loan

    customers .[3]

    Muthoot Mahila Mitra

    Muthoot Mahila Mitra (MMM) is the microfinance arm operating under the

    Groups flagship company, Muthoot Fincorp, and aims to serve the lower

    sections of the society through rural women entrepreneurship, and skill

    development in association with NABARD & ROPE.

    http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-1http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-1http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-1http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-2http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-2http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-2http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-3http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-3http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-3http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-3http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-2http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-1http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_India
  • 8/10/2019 Aarti Finals

    28/63

    Automotive

    The Muthoot Papachan Group has automotive dealerships in various locationsacross Kerala. It has dealerships of Jaguar, Land Rover , Honda cars,Honda

    and Yamaha bikes .[5]

    Hospitality

    Muthoot Plaza, the one of its kind star hotel in Trivandrum

    (Thiruvananthapuram) is to become the Hilton Garden Inn. The hotel

    reopened on 27 December 2013 after renovation as Hilton Garden Inn with

    127 rooms in the business class hotel category. The iconic Vivanta by

    Taj (previously known as Taj Green Cove) at Kovalam, is one of the

    internationally renowned Taj Hotels and al so one of the jewels in MPGs

    Hospitality Crown. MPG's upcoming properties include three business-class

    hotels and one five-star resort, to be located in Chennai and Kochi. A luxury

    serviced apartment is under development in Trivandrum. The Muthoot

    Skychef, with a facility spread over 32,000 sq ft, serves airlines such as Air

    India, Indian Airlines and Qatar Airways, and charters and VVIP flights .[6]

    Real Estate

    MPG Hotels and Infrastructure Ventures is a real estate development company

    headquartered in Trivandrum. The Group is currently developing 6 hotels, to

    be operated by international brands, as well as commercial and residential

    spaces in India. Muthoot Technopolis, located in Kochi, is an IT park, with a

    built-up area of 355,000 square feet wherefrom global IT Majors areoperating .[7]

    Alternate Energy

    MPG has been setting up wind farms in Tamil Nadu, India since 1993. The

    total installed capacity in wind power is 25 mega watts, with an investment of

    INR 1250 Mio. MPG has put plans in place to double its wind power

    generation capacity in the near future.

    http://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Hondahttp://en.wikipedia.org/wiki/Hondahttp://en.wikipedia.org/wiki/Hondahttp://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-5http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-5http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-5http://en.wikipedia.org/w/index.php?title=Vivanta_by_Taj&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Vivanta_by_Taj&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Vivanta_by_Taj&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Vivanta_by_Taj&action=edit&redlink=1http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-6http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-6http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-6http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-7http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-7http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-7http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-7http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-6http://en.wikipedia.org/w/index.php?title=Vivanta_by_Taj&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Vivanta_by_Taj&action=edit&redlink=1http://en.wikipedia.org/wiki/Muthoot_Pappachan_Group#cite_note-5http://en.wikipedia.org/wiki/Hondahttp://en.wikipedia.org/wiki/Land_Rover
  • 8/10/2019 Aarti Finals

    29/63

    Entertainment

    The Group owns th e 943 seater DTS Sound Kripa Cinema in Trivandrum. Muthoot Fincorp Limited, the flagship Company of the Muthoot Pappachan

    Group (MPG) ; established in 1887, the Muthoot Pappachan Group (MPG) is

    a diversified conglomerate with an overwhelming presence in multiple

    verticals. A journey of a thousand miles begins with a single step. True to this

    adage, the group planted its roots in retail trading and later diversified into

    various sectors including Financial Services, Hospitality, Automotive, Real

    Estate & Infrastructure, IT Services, Healthcare, Precious Metals, GlobalServices and Alternate Energy .

    Over the years MPG has grown to become a significant entity in the Indian

    business landscape. Currently it has an army of 20,000 employees, serving

    over a million customers. MPG's customer-centric approach an innovation in

    terms of new products that cater to changing customer needs have helped in

    winning the loyalty of innumerable customers, as well as attracting new ones.

    Adapting the latest technology and new ways to serve the customers without

    compromising on basic principles and ethics, that it has been following since

    its inception, is the backboneof Muthoot Pappachan Group. MPG has grown

    to encompass unimaginable proportions.

    The Muthoot Pappachan Group has established a business without boundaries,

    where challenges are considered stepping stones to progress. MPG strives to

    take the world forward and with ambition at work, the possibilities are

    infinite!

    Muthoot Fincorp is a finance company that caters to the financial needs of

    retail and institutional customers. We are registered with the Reserve Bank of

    India as a systemically important non-deposit taking non-banking finance

    company (NBFC) with a paid up capital of Rs 186.56 Crores and a Net Worth

    of Rs 1249.85 Crores as on 31-03-2014. At Muthoot Fincorp Limited, we are

    focused on providing a host of financial services. Our services comprise of a

  • 8/10/2019 Aarti Finals

    30/63

  • 8/10/2019 Aarti Finals

    31/63

    blend of philanthropy and business; looking for the combined social and

    economic benefit of all stakeholders.

    The benefits foreseen through the strategic CSR efforts are:

    To effectively communicate the organization's goals and direction

    Enhanced brand value and reputation

    Long-term sustainability for the organization and society

    Improved financial performance

    Build the relationship with businesses in the community and with local

    authorities

    Good relations with government and communities

    A license to operate

    With a long term and futuristic perspective, the entire range of CSR activities

    undertaken by the various group companies are streamlined through Muthoot

    Pappachan Foundation. The CSR programs of Muthoot Pappachan Foundation

    are bound by the theme- HEEL

    Health

    Education Environment

    Livelihood

    All the MPG companies will be leading their own CSR initiatives within the

    HEEL themes, specifically involving their staff and customers. MPF facilitates

    this process. Other than directly MPF-run CSR initiatives, activities would be

    initiated from the following divisions:

    Finance (MPG NBFCs) Hospitality

    Real Estate

    Automobiles

    Healthcare (Life Brigade Hospital)

    The stakeholders of MPG can be categorized as follows:

    Customers

    Employees

    Corporate

  • 8/10/2019 Aarti Finals

    32/63

  • 8/10/2019 Aarti Finals

    33/63

  • 8/10/2019 Aarti Finals

    34/63

    Alliance Partners

    We have strategic alliances with leading companies which offers our

    customers access to premium services at affordable costs.

    Western Union Money Transfer Money Transfer

    Franklin Templeton

    Mutual Funds

    Ezremit Money Transfer

    Money Transfer

    Xpress Money

    Money Transfer

  • 8/10/2019 Aarti Finals

    35/63

    Money Gram Money Transfer

    Money Transfer

    Trans Fast Money Transfer

    Money Transfer

    HDFC Mutual Fund

    Mutual Fund

    IDFC Mutual Fund

    Mutual Fund

    1. Corporate Ethos

    Let us not judge ourselves by the profit we make but by the trust and the

    confidence that people have in us. Let us cherish and nurture that trust and

    ensure that every person who deals with us deals with the confidence that he

    will not be misguided but his interests will be carefully protected.

    Even before the word ethos found a place in the corporate lexicon, Muthoot

    Finance Ltd. imbibed a work culture based on conscience. Since its inception,

    http://www.muthootfinance.com/corporate-ethos/http://www.muthootfinance.com/corporate-ethos/http://www.muthootfinance.com/
  • 8/10/2019 Aarti Finals

    36/63

  • 8/10/2019 Aarti Finals

    37/63

    Trustworthiness: We pledge loyalty in our operations, fairness in our

    dealings and openness in our practices. At Muthoot Finance Ltd., we

    embrace policies and practices that fortify trust.

    Integrity: The value is innate to a corruption-free atmosphere and an open

    work culture. We at Muthoot Finance Ltd. therefore cultivate transparency

    as a work ethic.

    Good Will: Muthoot Finance serves more than 6 million customers across

    the country. We add over 81000 customers each day to our customer base.

    With an unmatched goodwill, the company shoulders the responsibility of

    creating a deserving brand image

    Muthoot Fincorp (MF) was established to unify all group businesses

    pertaining to the Non-Banking Financial Sector. MF is today counted among

    the premier financial institutions in South India, with over 360 branches

    offering a whole gamut of products and services including Gold Loan,

    Debentures, Swarnavarsham, Life Insurance, General Insurance, Home Loan,

    Auto Loan, Money Transfer and Investment Solutions to meet the lifetime

    needs of customers

    BACKGROUND - MUTHOOT FINANCE LTD

    Muthoot finance is a flagship company of the Muthoot Group based in

    Southern India. The group has a presence in diverse businesses including

    financing, healthcare, real estate, education, hospitality, forex, wealthmanagement services, money transfer services, power generation and

    entertainment.

    Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based

    largest gold financing company in India in terms of loan portfolio. The

    company offers gold loan to individuals like small businessmen, vendors,

    traders, and salaried individuals who cannot access formal credit for reasons

    like lack of credit history, documentation, accessibility. The company

    generally gives small ticket loans (average ticket size of ~`31000) with a tenor

  • 8/10/2019 Aarti Finals

    38/63

    not exceeding one year, thereby limiting interest risk and asset-quality

    concerns. The loan-to-value varies from 60%-85%. Muthoot Finance Gold

    Loan portfolio as of November 30, 2010 comprised approximately 4.1 mn

    loan accounts in India which it serviced through 2263 branches across 20

    states. The company has further increased its branch network to 2611 branches

    as of February 28, 2011, servicing an average of 67,953 customers per day in

    the month of February 2011. As of February 28, 2011, the company has

    employed 15,664 persons. Other then Gold Loans business, the company

    provides money transfer services through their branches as sub-agents of

    various registered money transfer agencies.

    PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

    1. GOLD LOAN

    Muthoot Finance, Indias largest gold loan company is the first choice of

    Indians who want to make their dream a reality. May the dream be to start

    their own business or to buy their own home, for over 124 years Muthoot

    Finance has helped almost every Indians dream come true. Trusted by over

    70000 customers every day, Muthoot Finance Gold Loan has services and

    products that fit the need of any customer, making it the quickest, most

    convenient and safest way to take a gold loan.

    Key features of Gold Loan:

    Loan disbursal in 5 minutes Loans starts from 1,500 to 1 Crore Minimal documentation and credit assessment requirements High quality customer service in short response time Evaluation of gold ornaments takes place in house. Safety of Gold Ornaments: All branches as equipped with Strong

    Rooms for keeping safe custody of Gold Ornaments

  • 8/10/2019 Aarti Finals

    39/63

    Gold Loan available at over 3,000 Muthoot Finance branches across

    India

    0% processing fees Pre-payment option-without any penalty

    GOLD LOAN SCHEMES

    Scheme Name Value (per gram) Interest (% p.a.)

    True Value Personal Loan (TPL) Rs. 1,035/- 12%

    Super Value Personal Loan (SPL) Rs. 2,260/- 24%

    Real Value Personal Loan (RPL) Rs 1,960/- 18%

    Express Personal Loan (XPL) Rs. 2,090/- 21%

    2. GOLD COINS

    Now invest your wealth in the ever rising power of Gold with the Muthoot

    Precious Metals Corporation. 24 carat Pure Gold Coins: Muthoot Precious

    Metals Corporation presents Gold Coins with 999% purity (24 Carat). Invest

    in safe, secure and profitable Gold Coins.

    The Gold Coins hold many advantages:

    999% pure Finance schemes with easy monthly installments Appreciating asset Higher return on investment with no risks

  • 8/10/2019 Aarti Finals

    40/63

    Available in denominations such as 2g, 4g, 8g, 20g and 50g to suit

    every pocket.

    The ideal gift for your near and dear ones

    Silver Coins

    999% pure Silver Coins

    One of India's few financial players that deals in Silver Coins

    Available in 50 gm and 100 gm

    Available at over3, 000 Muthoot Finance brances across India

    3. MONEY TRANSFER

    One of the finest Money Transfer services in India, with over 700,000

    transfers annually, Muthoot Money Transfer is the largest payout centre in

    India. Muthoot Money Transfer allows real time money transfers from acrossthe seas, with the money reaching the receiver in less than 10 minutes. The

    money can be transferred from First Remit/Coinstar, Xpress Money, Ez

    Remit, Money Gram, Royar Money, Global Money Transfer, Western Union,

    Transfast, Instant Cash and even Muthoot Finances own branches abroad.

    The service boasts low costs, high exchange rates and NO additional service

    charge to the receiver.

    The key highlights of this service are:

    Fastest Money Transfer facility No bank account needed for amounts up to Rs. 50,000 The receiver does not have to pay any service charge Certified by the RBI Access it in any of the 3000 branches across the country

  • 8/10/2019 Aarti Finals

    41/63

    4. FOREIGN EXCHANGE

    Muthoot Foreign Exchange offers you currency exchange facilities as well asallows you to buy and sell foreign currency and Travellers cheques with

    Muthoot Foreign Exchange service. With the wide network of almost 3000

    branches, we ensure ease of transaction. Muthoot Foreign Exchange helps you

    get competitive rates for all currencies and notes in 35 major currencies as

    well as 100 miscellaneous ones!

    A few features of our Foreign Exchange service:

    Buying and selling of all major Travellers cheques and Travel Cards Commission free encashment of Travellers cheques Competitive rates for all currencies Remittance of funds abroad for various purposes

    5. MPOWER CARD

    Your life is made infinitely easier with the Muthoot MPower Card, which is

    a unique identity card with numerous benefits:

    Access it anywhere in India Earn Loyalty Points on every transaction at ANY Muthoot branch Redeem these Loyalty Points for attractive gifts Get Rs. 20 per gram extra on Gold Loan Keep all your jewelry in our lockers free of cost (No locker charges!) Rs. 50,000 Personal Accident Insurance coverage Deposit and withdraw money from any branch on Real Time Special overdraft scheme for MPower Cardholders.

  • 8/10/2019 Aarti Finals

    42/63

    6. TRAVEL SMART

    Within just a few months of its launch Muthoot Travel smart has already become one of the leading IATA (International Air Transport Association)

    accredited agencies and has got certified by IRCTC. Muthoot Travel smart

    offers all the services of a travel agency and more, such as travel insurance

    and foreign exchange Muthoot Tra vel smart carries forward the groups core

    values of helping India make the right decision with their money by helping

    you during your travels, both familial and official. In addition to the 3000

    branches of Muthoot Finance in India, the services of Muthoot Travel smart

    can be accessed in 6 offices overseas as well.

    The services offered under Travel smart include:

    International & Domestic Ticketing Railway Ticketing Tours Passport, Emigration & Visa

    Travel Insurance

    VALUE ADDITION IN PRODUCT AND SERVICES OF THE

    MUTHOOT FINANCE LTD

    We have challenged ourselves to perform better than the best. We have

    now launched a new venture in Gold Financing, offering Customers loan

    against the security of Gold Exchange Traded Funds (ETFs) units. This will

    not only add value to the services but also enable the Company to service

    financial requirements of new Customer segment.

    The visionary zeal, constant innovation and customer-oriented product

    & service delivery deployed at every phase of its growth are indeed

    exemplary. And Muthoot Group is now all set to go places, backed by its

    assets built by extraordinary people and high values.

  • 8/10/2019 Aarti Finals

    43/63

  • 8/10/2019 Aarti Finals

    44/63

    May 27, 2011, Kochi, India: International money transfer consumers across

    Kerala - Indias foremost remittance driven economy will now be able to

    receive their Western Union Money Transfer SM transactions from Muthoot

    Finance - a leading Kerala based financial institution.

    Muthoot Finance will now offer Western Union Money Transfer

    services from its countrywide network of 2800 locations linking them to

    Western Unions network of more than 400,000 locations in over 200

    countries and territories across the world.

    Launching the service, Mr George Alexander Muthoot Managing

    Director, Muthoot Finance Ltd said, Here, on this occasion, three of the

    biggest players of the Indian Financial Services industry have come together

    with the intention of providing a premium money transfer service to customers

    across the country.

    Muthoot Finance Ltd., through its extensive network of branches, aims

    to capitalize the huge potential of the money transfer business in India.

    With its expansive global network, Western Union is uniquely

    positioned to deliver fast, reliable and convenient money transfer services toconsumers across remote geographical locations globally.

    Through our agreement with Western Union we have facilitated a

    number of classes of trade including retail and banks to offer Western Union

    Money Transfer s services to the remotest corners of India. The collaboration

    with Muthoot Finance is one more step in this direction which would

    positively impact people across the 2,800 branches offering the service,

    History of GOLD loan

    Gold is a brilliant yellow precious metal that is resistant to air and water

    corrosion. It is a very soft and pure metal. Gold is the most malleable and

    ductile metal found on earth. Thats why it is expensive and it is alloyed with

    other metals, usually copper and silver to make it less expensive and harder, a

    karat is the unit that measures the purity of gold jewellery or else it is

    hallmarked with a three digit number that indicates the parts per thousand of

  • 8/10/2019 Aarti Finals

    45/63

    gold. Some countries hallmark gold with a three digit number that indicates

    the parts per thousand of gold. The alloyed gold comes in many colours and

    may not be bright yellow all the time. It has long been a values commodity,

    particularly in India where it is considered auspicious, and had been in use for

    centuries in the form of jewellery, coins, bullions, electronics, and dentistry,

    also for other medical purposes. Though gold is a highly liquid asset, it wasnt

    until recently that consumers leveraged it effectively to meet their liquidity

    needs.

    Lenders provide loans by securing gold assets as collateral. Compared with the

    rest of the world in India the gold loan market is big business. Until a decade

    back, most of the lending was in the unorganized sector through pawnbrokers

    and money lenders. However this scenario changed with the entrance of

    organized sector players such as banks and non banking finance companies

    (NBFCs) which now command more than 25% of the market. The organized

    gold loan market has grown at 40% CAGR form 2002 to 2010. NBFCs have

    been a major driving force behind this growth given their extensive network.

    Faster turnaround time, higher loan to value ratios and the ability to serve non-

    bankable customers. Of late, banks have improved their gold loan product

    features and services. Coupled with comparatively lower interest rates

    charges, bank stand to gain market share at the expanses of NBFCs in the near

    future.

    The eligibility criteria required to apply for gold lone in India includes three

    factors. Firs-tly, the person has to be above 18 years of age. Secondly, the person applying or a gold loan in India should have a ID & address proof and

    last but not the least the applicant should be working on a regular salary basis ,

    means there should be a constant flow of income.

    BACKGROUND: GOLD AND THE INDIAN SOCIETY

    Gold has traditionally been among the most liquid asset and is an accepted

    universal currency. it has traditionally been consumed by individuals in the

    form of jewellery, especially in India were it is considered auspicious. Gold is

  • 8/10/2019 Aarti Finals

    46/63

    presumed to be a safe haven in times of economic uncertainty, a fact

    exemplified by a 30% increases the value of gold over the past year India is

    one of the largest market of gold accounting for approximately 10% of the

    total world gold stock as of 2010. Rural India accounts for 65% of this gold

    stock. Though gold price have increased 19% CAGR from 2002 to 2010, gold

    stock in India has grown at 22% CAGR During the same period to 18000 tons

    (Rs.32000 billion). The demand for gold has followed a regional trend with

    southern India accounting for 40% of annual demand, followed by the west

    (25%), north (20-25%) and east (10-15%).

    Looking for Gold Loan Market

    The Key Players in the Indian gold loan market include the unorganized

    sector, banks _ public/private/cooperatives and NBFCs. While the

    unorganised sector, comprising local pawnbroker and money leader has

    traditionally dominated the gold loan market for money decades and still

    commands nearly 75% of the market the organized sector led by NBFCs is

    catching up fast. The organized sector has grown at rapid paces of 40% CAGRform the 2002 to 2010 and is expected to grow by 33% to41% CAGR in 2011

    And in doing so these companies are challenges the dominance of the large

    unorganized sector within the organized sector, NBFCs have grown at a repaid

    rate from 18.4% in FY to 32.2% in FY10. (Source: cognizant 20-20 insight

    jan.2012)

    Muthoot finance

    With a tagline loan in just 5 minutes muthoot fiancs is a Indias largest gold

    loan company & is the fast choice of Indian who want to make their dream a

    reality. May the dream be to start their own business or to buy their own

    home: muthoot finance has helped almost every Indians dream come true,

    trusted by over 76000 customer every day muthoot finance gold loan has

    services and products that fit the need of any customers, making it the quickest

    ,most convenient and safest way to take gold loan

  • 8/10/2019 Aarti Finals

    47/63

    Headquartered in the southern Indian state of Kerala, their operating history

    has evolved over a period of 72 since M George muthoot (the father of our

    promoter) founder a gold loan business in 1939 under the heritage of a

    treading business established by his father, ninan mathai muthoot in 1987.

    since our formation, we have broadened the scale and geographic scope of

    their retail leading operation so that, as of march 31, 2008, 2009, 2010, 2011

    and in the period ended September 30, 2011 revenue from their gold loan

    business constituted 95.97% 96.71% 98.08% 98.75% and 99.01% respectively

    , of their total income,

  • 8/10/2019 Aarti Finals

    48/63

  • 8/10/2019 Aarti Finals

    49/63

    a year, the MUTHOOT FINCORP will have to find new financing for the

    loan, which will have 4 more years before it matures. If interest rates have

    risen, the MUTHOOT FINCORP may have to pay a higher rate of interest on

    the new financing than the fixed 7 % it is earning on its loan.

    Suppose, at the end of a year, an applicable 4-year interest rate is 8 %.

    The MUTHOOT FINCORP is in serious trouble. It is going to earn 7 % on its

    loan but would have to pay 8 % on its financing. Accrual accounting does not

    recognize this problem. Based upon accrual accounting, the MUTHOOT

    FINCORP would earn Rs 100,000 in the first year although in the precedingyears it is going to incur a loss.

    The problem in this example was caused by a mismatch between

    assets and liabilities. Prior to the 1970's, such mismatches tended not to be a

    significant problem. Interest rates in developed countries experienced only

    modest fluctuations, so losses due to asset-liability mismatches were small or

    trivial. Many firms intentionally mismatched their balance sheets and as yield

    curves were generally upward sloping, MUTHOOT FINCORP could earn a

    spread by borrowing short and lending long.

    Things started to change in the 1970s, which ushered in a period of volatile

    interest rates that continued till the early 1980s. US regulations which had capped

    the interest rates so that MUTHOOT FINCORP could pay depositors, was abandoned

    which led to a migration of dollar deposit overseas. Managers of many firms, who

    were accustomed to thinking in terms of accrual accounting, were slow to recognizethis emerging risk. Some firms suffered staggering losses. Because the firms used

    accrual accounting, it resulted in more of crippled balance sheets than MUTHOOT

    FINCORP

    Interest Rate Risk :-

    Interest Rate Risk refers to the risk of changes in interest rates

    subsequent to the creation of the assets and liabilities at fixed rates. The

    phased deregulations of interest rates and the operational flexibility given in

  • 8/10/2019 Aarti Finals

    50/63

    pricing most of the assets and liabilities imply the need for system to hedge the

    interest rate risk. This is a risk where changes in the market interest rates

    might adversely affect financial conditions.

    The changes in interest rates affects in large way. The immediate impact of

    change in interest rates is on earnings by changing its Net Interest Income ( NII). A

    long term impact of changing interest rates is on Market Value of Equity (MVE) or

    net worth as the economic value of assets, liabilities and off-balance sheet positions

    get affected due to variation in market interest rates.

    The risk from the earnings perspective can be measured as changes in

    the Net Interest Income (NII) OR Net Interest Margin (NIM).

    There are many analytical techniques for measurement and

    management of interest rate risk. In MIS of ALM, slow pace of

    computerization in and the absence of total deregulation, the traditional GAP

    ANALYSIS is considered as a suitable method to measure the interest raterisk.

    Data Interpretation

    Gap Analysis :-

    The Gap or mismatch risk can be measured by calculating Gaps over differenttime buckets as at a given date. Gap analysis measures mismatches between rate

    sensitive liabilities and rate sensitive assets including off-balance sheet position.

    An asset or liability is normally classified as rate sensitive if:

    If there is a cash flow within the time interval.

    The interest rate resets or reprocess contractually during the interval.

  • 8/10/2019 Aarti Finals

    51/63

    RBI changes the interest rates i.e., on saving deposits, export credit,

    refinance, CRR balances and so on, in case where interest rate are

    administered.

    It is contractually pre-payable or withdraw able before the stated maturities

    The Gap is the difference between Rate Sensitive Assets (RSA) and Rate

    sensitive Liabilities (RSA) for each time bucket.

    The positive GAP indicates that RSAs are more than RSLs (RSA>RSL).

    The negative GAP indicates that RSAs are more than RSALs (RSA

  • 8/10/2019 Aarti Finals

    52/63

    the future behavior of assets; liabilities and off-balance sheet items to changes

    in market variables and estimate the embedded options.

    A scientifically evolved internal transfer pricing model by assigning values on

    the basis of current market rates to funds provided and funds used is an imported

    component for elective implementation of ALM systems. The transfer price

    mechanism can enhance the management of margin i.e., landings or credit spread

    the funding or liability spread and mismatch spread. It also helps centralizing

    interest rate risk at one place which facilitates effective control and management of

    interest rate risk. A well defined transfer pricing system also provides a rational

    framework for pricing of assets and liabilities.

    COMPARATIVE ASSET LIABILITY SHEET AS ON 31 ST MARCH2012-13

    As at 31-Mar-13 As at 31-Mar-12 ABSOLUTEINCREASE/DECREAES

    CHANGEIN %

    CAPITAL ANDLIABILITIES Capital 4,652,257 4,577,433 74,824 1.634627967

    Reserves and Surplus 249,111,291 210,618,369 38,492,922 18.27614665

    Employees Stock Options(Grants) OutstandingDeposits

    2,085,864,054 1,674,044,394 411,819,660 24.60028309

    Borrowings 143,940,610 129,156,925 14,783,685 11.44629682

    Other Liabilities andProvisions 289,928,565 206,159,441 83,769,124 40.63317382

    2,773,525,565 2,224,585,697 548,939,868 24.67604951

    ASSETS

    Cash and Balances withReserve Bank of India

    251,008,158 154,832,841 96,175,317 62.11557986

    Balances with Banks andMoney at Call and Shortnotice

    45,680,191 144,591,147 -98,910,956 -68.40733894

    Investments 709,293,656 586,076,161 123,217,495 21.02414382

  • 8/10/2019 Aarti Finals

    53/63

    Advances 1,599,826,654 1,258,305,939 341,520,715 27.14130995

    Fixed Assets 21,706,480 21,228,114 478,366 2.253455017

    Other Assets 146,010,773 59,551,495 86,459,278 145.1840596

    2,773,525,912 2,224,585,697 548,940,215 24.67606511

    Contingent Liabilities 5,751,224,839 4,790,515,044 960,709,795 20.05441557

    Bills for Collection 134,284,924 81,248,646 53,036,278 65.27650688

    Interpretation :

    The total current liabilities for the year are Rs.206159441 is less than the total

    assets for the year are Rs.2224585697. Therefore the assets are more than the

    liabilities. So there is a positive gap of Rs.548939688 i.e 24.67%

    -1,000,000,000

    0

    1,000,000,000

    2,000,000,000

    3,000,000,000

    4,000,000,000

    5,000,000,000

    6,000,000,000

    7,000,000,000

  • 8/10/2019 Aarti Finals

    54/63

  • 8/10/2019 Aarti Finals

    55/63

    Interpretation :

    The total current liabilities for the year are Rs.43731212 is less than the total

    assets for the year are Rs.1832707732. Therefore the assets are more than the

    liabilities. So there is a positive gap of Rs. 391877965 i.e 21.38%

    -1,000,000,000

    0

    1,000,000,000

    2,000,000,000

    3,000,000,000

    4,000,000,000

    5,000,000,000

    6,000,000,000

  • 8/10/2019 Aarti Finals

    56/63

  • 8/10/2019 Aarti Finals

    57/63

    Interpretation :

    The total current liabilities for the year are Rs.64047747 is less than the total

    assets for the year are Rs.1331766032. Therefore the assets are more than the

    liabilities. So there is a positive gap of Rs. 500941700 i.e 37.61%

    -3,000,000,000

    -2,000,000,000

    -1,000,000,000

    0

    1,000,000,000

    2,000,000,000

    3,000,000,000

    4,000,000,0005,000,000,000

    6,000,000,000

    7,000,000,000

  • 8/10/2019 Aarti Finals

    58/63

    COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH

    2009-2010

    As at 31-Mar-10

    As at 31-Mar-09

    ABSOLUTEINCREASE/DECREAES

    CHANGEIN %

    CAPITAL ANDLIABILITIES Capital 354,43 319,39 3504 10.970913

    Reserves andSurplus

    11,142,80 6,113,76 502904 82.257727

    Deposits 100,768,60 68,297,94 3247066 47.542664

    Borrowings 4,478,86 2,815,39 166347 59.084887

    Other Liabilitiesand Provisions

    16,431,91 13,689,13 274278 20.036189

    133,176,60 91,235,61 4194099 45.969978

    ASSETS

    Cash and Balanceswith Reserve Bankof India

    12,553,18 5,075,25 747793 147.34112

    Balances withBanks and Moneyat Call and Shortnotice

    2,225,16 3,971,40 -174624 -43.970388

    Investments 49,393,54 30,564,80 1882874 61.602693

    Advances 63,426,90 46,944,78 1648212 35.10959

    Fixed Assets 1,175,13 966,67 20846 21.564753

    Other Assets 4,402,69 3,712,71 68998 18.584269

    133,176,60 91,235,61 4194099 45.969978

    ContingentLiabilities

    593,008 328,148,24 -32221816 -98.192866

    Bills for Collection 6,920,71 4,60683 231388 50.227163

  • 8/10/2019 Aarti Finals

    59/63

    Interpretation :

    The total current liabilities for the year are Rs.1368913 is less than the total

    assets for the year are Rs.9123561. Therefore the assets are more than the

    liabilities. So there is a positive gap of Rs. 4194099 i.e 45.96%

    -40000000

    -30000000

    -20000000

    -10000000

    0

    10000000

    20000000

    30000000

    40000000

  • 8/10/2019 Aarti Finals

    60/63

    FINDINGS

    ALM technique is aimed to tackle the market risks. Its objective is tostabilize and improve Net interest Income ( NII) .

    Implementation of ALM as a Risk Management tool is done using

    maturity profiles and GAP analysis.

    ALM presents a disciplined decision making framework for s while at the

    same time guarding the risk levels.

    There has been a small reduction in Gross Sales and with the performance

    of prefab Division the Gross Profit gap has narrowed and contributing to

    the EBIT. The Gross Profit has increased considerably from 6584124 Cr in

    Last year to 968547 Cr in year. The interest payment has increased by

    6987Cr in the Current year and the Profit before Tax at 69857 when

    compared to 5874568 cr in Last year.

    Perform Division realization has increased by 8% even the Turnover has

    come to 641.80 Cr from 400.09 Cr in last year.

    The PAT is in an increasing trend from 2009-2010 because of increase in

    sale prices and also decreases in the cost of manufacturing. In 2011 and

    2012 even the cost of manufacturing has increased by 5% because of

    higher sales volume PAT has increased considerably, which leads to

    higher EPS, which is at 98.366 in 2011.

    The company also increased considerably which investors in coming

    period. The company has taken up a plant expansion program during the

    year to increase the production activity and to meet the increase in the

    demand

  • 8/10/2019 Aarti Finals

    61/63

    CONCLUSION

    The purpose of ALM is not necessarily to eliminate or even minimize risk.

    The level of risk will vary with the return requirement and entitys

    objectives.

    Financial objectives and risk tolerances are generally determined by senior

    management of an entity and are reviewed from time to time.

    All sources of risk are identified for all assets and liabilities. Risks are broken

    down into their component pieces and the underlying causes of eachcomponent are assessed.

    Relationships of various risks to each other and/or to external factors are

    also identified.

    Risk exposure can be quantified 1) relative to changes in the component

    pieces, 2) as a maximum expected loss for a given confidence interval in a

    given set of scenarios, or 3) by the distribution of outcomes for a given set of

    simulated scenarios for the component piece over time.

    Regular measurement and monitoring of the risk exposure is required.

    Operating within a dynamic environment, as the entitys risk tolerances and

    financial objectives change, the existing ALM strategies may no longer be

    appropriate.

  • 8/10/2019 Aarti Finals

    62/63

    Suggestions

    They should strengthen its management information system (MIS) and

    computer processing capabilities for accurate measurement of liquidity

    and interest rate Risks in their Books.

    In the short term the Net interest income or Net interest margins (NIM)

    creates economic value of the which involves up gradation of existing

    systems & Application software to attain better & improvised levels.

    It is essential that remain alert to the events that effect its operating

    environment & react accordingly in order to avoid any undesirable

    risks.

    Muthoot FINCORP requires efficient human and technologicalinfrastructure which will future lead to smooth integration of the riskmanagement process with effective business strategies.

  • 8/10/2019 Aarti Finals

    63/63

    BIBILIOGRAPHY

    Title of the Books Author

    Publications

    1. Risk management Gustavson hoyt sout western,

    Thomson learning(2001)

    2. India financial system M.Y. Khan

    Mcgraw Hill Edition

    3. Management Research magazine P.M.Dileep Kumar

    Web sites

    www.muthoothfianancecorp.com

    www.investoros.com

    www.financeindia.comwww.google.com

    http://www.investoros.com/http://www.investoros.com/http://www.financeindia.com/http://www.financeindia.com/http://www.investoros.com/