InvestorQ : Is it true that Muthoot Finance has been able to raise funds at just 4.4%? How is it possible to raise funds at such a low cost?
Priyanka N made post

Is it true that Muthoot Finance has been able to raise funds at just 4.4%? How is it possible to raise funds at such a low cost?

Answer
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NISHA Nayak answered.
7 months ago


Muthoot Finance has raised $550 million in senior secured notes for a three-and-a-half-year tenure which carries a fixed coupon rate of 4.4%. This is substantially lower than the previous bond issue which was done at 6.125% in October 2019. Both these issues form part of a $2 billion global medium-term note programme to enhance its resource lending capacity. However, coming to your question on costs, this is the dollar borrowing in the international market so there will be the currency risk that is implicit in this deal. Let me explain. The 4.4% interest that Muthoot has to pay during the year will be dollar terms. Therefore, if the rupee depreciates against the dollar by 5-6% in a year (which is the norm), the total effective cost for Muthoot will be closer to 10%, which is the cost it would pay on domestic borrowings anyways. Of course, the open risk here is that the actual cost could go up much higher if the rupee were to weaken sharply in the coming years. However, the wager in such cases is that the RBI will intervene to support the rupee around lower levels.