BUSINESS

CASE ANALYSIS AND VIVA

(subject Code : 576122(76) Submitted in the partial fulfillment for the award

of degree
MASTER OF BUSINESS ADMINISTRATION (MBA )
Of

Chhattisgarh Swami Vivekanand Technical University

Bhilai (C.G)

Session 2021 – 22

Submitted To : Submitted by: Supervised by:

Dr. SANJAY PANDAY NAME - B Sandeep Acharya Mr.Amit stieve henry

Principal and Hod MBA -1st Sem Assistant Proff.

MUTHOOT FINANCE

Gold is always considered a hedge against uncertainties. Whenever there is prolonged economic uncertainties,
gold value increases. Given that there has been very prolonged uncertainty in India, I was curious to look into
Muthoot finance to play the gold theme. Let me try to explain more in -“Muthoot Finance Ltd- Analysis”.

Gold financing companies(Muthoot Finance Ltd) gives out loan on the basis of gold

Muthoot Finance Ltd. is the largest gold financing company based in India. They have been
standing firm in the financial services market for over 70 years. The company offers various
financial services and have established itself across the country and internationally.
Founded in 1939 in Kerala, India by M George Muthoot, Muthoot Finance Ltd. is the largest
non-banking financial institution for gold loans in India. The company falls under the ‘Muthoot
Muthoot Finance Limited (MFL) is a “systematically important non-deposit taking NBFC” that
is involved in the business of providing loans against gold and is today, considered to be the
largest company in India (in terms of loan portfolio, with a gold loan portfolio of Rs.22694
crores provided to over 5.5 million accounts) to be offering this service. It is the flagship
company of the Kerala based “Muthoot Group”. MFL has an operating history of over seven
decades having first started the gold loan business in 1939. Muthoot Finance Ltd. was
incorporated as a private limited Company on 14th March, 1997 and was converted into a
public limited Company on 18th November, 2008. The Company is promoted by Mr. M. G.
George Muthoot, Mr. George Thomas Muthoot, Mr. George Jacob Muthoot and Mr. George
Alexander Muthoot collectively operating under the brand name of „The Muthoot Group‟,
which has diversified interests in the fields of Financial Services, Healthcare, Education,
Plantations, Real Estate, Foreign Exchange, Information Technology, Insurance Distribution,
Hospitality etc. The Company obtained permission from the Reserve Bank of India for
carrying on the business of NonBanking Financial Institutions on 13.11.2001 vide Regn No.
N 16.00167. The Company is presently classified as Systemically Important Non- Deposit
Taking NBFC
Group’ and is established in over 4400 branches across the country and internationally such
as the US, the UK, UAE, Central America and Sri Lanka.
Muthoot provided business personal loans that are secured by gold jewellery. Additionally,
they offer a wide range of services such as insurance, financial services, money transfer,
foreign exchange, gold loans, housing finances and digital financial services. It is deemed as
the most trusted Financial Services Brand in India for the last 5 years consecutively.
The company has shown significant growth during the past years. Let’s analyze the
Strength, Weaknesses, Opportunities, and Threats of Muthoot Finance to understand how
the company stood out from their competitors and continues to grow.

Progress Report :
Gold is used as a collateral for gold financing where the asset value changes every day.
If there is sudden significant drop in gold price, the asset value(gold value) can go below the
loan value. And if this is frequent then, the gold finance business will become unviable. But
this is not the case.

So, the assumption based on the historical data is Gold prices are mostly stable, inching
upwards and the downward price movement is quite infrequent.

The drop in prices by 20% during a 6 month(Typical lending horizon for Gold finance
company) horizon is hardly few in the entire history of gold. And such drop is taken care by
the lower Loan to value ratio(max 75%).

The company has shown significant growth during the past years. Let’s analyze the
Strength, Weaknesses, Opportunities, and Threats of Muthoot Finance to understand how
the company stood out from their competitors and continues to grow.
Competitors of Muthoot Finance
Muthoot Finance has many competitors, but none of them have as much market size or
revenue as it does. Even though they are leading the market, it is vital to understand
competitors in a market to have an effective SWOT analysis. Muthoot Finance has a
revenue of 1.4 billion dollars while its competitors are far behind in numbers.

Manappuram Finance Limited:

They are one of the biggest competitors of Muthoot finance ltd. They have a revenue of over
738.9M dollars. Originated in Kerala in 1949 by Shri V. C. Padmanabhan, the company has
more than 4190 branches in the country. The company was first in Kerala to issue bonus
shares in the ratio of 1:1 by three times in 5 years.

Shriram City: Founded in 1986 by Ramamurthy Thyagarajan in Kerala, India, Shriram City
is a leading Non-Banking Financial Institution with more than 900 branches. It offers services
such as Gold loans, vehicle loans, personal loans and investment options like fixed deposits.

ESAF Microfinance: Evangelical Social Action Forum or EFAF was founded as an NGO in
1992 by Shri. K. Paul Thomas and later turned into a small finance bank in 2017. Before it
turned into a small finance bank, it was an NBFC(Non-banking financial company)-
MFI(Microfinance institution).
What is a SWOT Analysis?
A SWOT Analysis matrix is a powerful tool that helps an organisation assess their Strengths,
Weaknesses, Opportunities and Threats. Internal factors such as strengths and weaknesses
can be controlled, whereas external factors like opportunities and threats cannot.

SWOT Analysis can help an organisation make the most of what they have to ensure their
company succeeds. With this in-depth understanding, the company can lessen their chances
of failure by recognising where they lack and avoid threats that they would usually be
unaware of. This analysis can be helpful during decision making whenever the objectives are
defined.

SWOT Analysis forces a company to view their business and/or plan in distinguishing ways
via contrasting paths. This technique exhibits the true potential of an idea or plan and
henceforth, helps the company reach their goals in a strategic manner with a rock-solid
foundation for business growth.

Now that we have understood the importance of the SWOT analysis, let’s dive into how
Muthoot Finance used this matrix tool to its advantage.
Strengths of the company

Muthoot Finance has a long list of strengths that made it a big player in the finance market.
Some of its strengths include constant growth and wide presence. Strengths are aspects of
an organization that contributes effectively or a system that distinguishes them from their
competitors. Any aspect of the organization is considered a strength if it brings them a clear
advantage.
Let us take a brief look into Muthoot Finance strengths.
 Good Growth in Trailing Twelve Months Earnings per Share: The company has reported
413.9% returns for Nifty 500 in 5.4 years.
 It is increasing profits and revenue for the past 3 quarters.
 Good possibilities to scale business because of geographical diversification.
 The company has a leading position in the Gold loan business with a strong presence under
the semi-urban and rural markets.
 It didn’t seem to get much impacted during the pandemic which shows great trust in the
company.
 Strong ability to raise capital.
weakness of the company

Being such a strong player in the market it has very few weaknesses. It is highly important
for an organisation to recognise their weaknesses. It aids the company to grow and lead the
market. Muthoot Finance’s weaknesses are low but not zero, thus let’s look into its main
shortcomings.
 Its weaknesses include its large dependency on gold loans. Since the company is largely
dependent on the gold business, a fall in gold prices will directly impact the company.
 The company’s shareholding decreased last quarter due to MFs
 The company has a weak financial position i.e. it has a low Piotroski score.

Opportunites of the company

Opportunities are targets to hit for something good to happen. These shouldn’t have to be
game-changers: even minute advantages can help a company compete effectively. Changes
in government regulations affecting their sector, as well as changes in social patterns,
demographic profiles, and lifestyles, can all present fascinating opportunities.
Let’s dive into what opportunities did Muthoot Finance grab.
 Demand for gold will likely rise due to the lockdown implications.
 It is showing a good rise in net profit and has an increase of 10% in the share market in the
last three months.
 In recent times, it shows a decrease in Provision.
 The company can venture into new markets since it already has a good image in the market.

Threats of the company

Anything that might have a negative impact on your firm from the outside is considered a
threat. Consider the challenges you’ll encounter in bringing your product to market and
marketing it. It could be a drop in the quality of the products or services presented. However,
whatever it may be, anything that could cause harm to the organization should be
recognised.
Muthoot Finance is a big player in the market and others have noticed the same which in
turn resulted in more competition from NBFCs and banks, here are some of the other threats
for the company.
 Increasing competition from the banks and non-banking financial institutions.
 While the company’s gold business is expected to do well, its subsidiary businesses don’t
seem to do well.
 The company’s housing finance segment saw disbursements decline by 40% in the first
quarter of this year. Post pandemic effects on housing finance don’t give great signs of near
growth.
 It has a high market cap, with low public shareholdings.
Recognising potential aspects that will ensure a company’s growth is essential. In this in-
depth SWOT analysis of Muthoot Finance Ltd., we understood how the corporation
enhances their services to hold its status. Despite the plunge in gold prices today, the
company recognised it’s potential threat and worked on growing

Summary :
Muthoot Finance Ltd. is an Indian financial corporation and the largest gold loan NBFC in the
country.In addition to financing gold transactions, the company offers foreign exchange services,
money transfers, wealth management services, travel and tourism services, and sells gold coins.
The company is headquartered in Kochi, Kerala and operates over 4,400 branches throughout the
country. Outside India, Muthoot Finance is established in the UK, the US, and the United Arab
Emirates.
The company falls under the brand umbrella of the Muthoot Group. Its stocks are listed on
the Bombay Stock Exchange (BSE) and NSE. As of March 2012, revenue (after expenditure)
stood at more than 23,000 crore (US$4.2 billion).The target market of Muthoot Finance includes
small businesses, vendors, farmers, traders, SME business owners, and salaried individuals.
CONCLUSION :
The company is a “Systemically Important Non–deposit taking NBFC” headquartered in the southern
Indian state of Kerala. The company issue secured non–convertible debentures called “Muthoot Gold
Bonds” on a private placement basis. Proceeds from the issuance of Muthoot Gold Bonds form a
significant source of funds for their Gold Loan business. It also relies on bank loans and subordinated
debt instruments as irs sources of funds. The emergence of organized retail undoubtedly gives
consumers a wider choice of goods, more convenience, and a better shopping environment, among
other benefits. Organized retail can appear small but spread in all local markets, social economic
developments. It is also true that presently, they are facing many internal and external challenges,
which are hindering their performance. Hence, there is a need to consider the above listed challenges
for another reform to improve the performance of the gold loan particularly to meet the requirement of
new and open improve the performance of the gold loan particularly to meet the requirement of new
and open competitive environment.
As a result of our SWOT analysis, we now have a list of potential areas Muthoot Finance Ltd. needs
to work on. The organisation has a broad scale for business due to its diversified geographical reach.
However, one of its flaws is heavy reliance on gold. Today, we are witnessing a plunge in gold prices,
which adversely impacts their business. As a result, the firm may leverage its leading reputation to
expand into new markets and services.
Muthoot Finance Ltd. is a market leader in gold loans, with consistent growth over time.
Due to its consistent returns, the company’s reputation has grown over the years. Despite the pandemic
and a slew of challenges, the firm has managed to maintain its position as the industry leader.