Entering Mutual Fund Space to Cater to Customers’ ‘Changing Needs’ – Muthoot Finance CFO

Entering Mutual Fund Space to Cater to Customers’ ‘Changing Needs’ – Muthoot Finance CFO

Update on the Indian Equity Market:

On Monday, Sensex ended higher across-the-board buying and US-China trade talks optimism, Sensex gained 530 pts and Nifty ended at 12,079. News reports that China and the United States were ‘very close’ to a phase one trade deal, boosted investor sentiment further.

Among the sectors, all but media stocks ended in the green. Metal stocks rallied the most on renewed hopes of positive developments in US-China trade talks. The Nifty Metal index climbed over 3 per cent to 2,599 levels. Auto and Pharma stocks were next on the list. On the downside, Nifty Media index slipped over 1.5 per cent to 1,946 levels.

Among stocks, Bharti Airtel (up 7 per cent) emerged as the top gainer on the index while ONGC (down over 2 per cent) was the biggest loser. 

Entering Mutual Fund Space to Cater to Customers’ ‘Changing Needs’ –  Muthoot Finance CFO 
Key takeaways from the interview of Mr Oommen K Mammen, Chief Financial Officer, Muthoot Finance; dated 25th November 2019:

  • When asked about entering into the Mutual Fund space Mr Mammen said that Muthoot Finance Ltd.’s foray into mutual funds by acquiring IDBI Asset Management Ltd. will help cater to the changing needs of its two lakh customers.
  • Mammen told in an interview that if they don’t provide alternative investment products, customers might look into other opportunities.
  • He  stated that offering mutual fund options will help take care of their customer’s changing needs.
  • According to Mr Mammen, Mutual funds are the best asset class.
  • The acquisition worth Rs 2,150 mn is subject to regulatory approval and is expected to be completed by February next year.
  • Muthoot Finance will purchase 100 per cent equity shares of IDBI AMC and IDBI MF Trustee Company for a total consideration of Rs 215 crore, according to exchange data. IDBI Mutual Fund has an asset base of over Rs 5,300 crore. Muthoot Finance will acquire 66.67 per cent stake in IDBI AMC from IDBI Bank and 33.3 per cent from IDBI Capital Market & IDBI Securities.

Consensus Estimate (Source: market screener website)

  • The closing price of Muthoot Finance was ₹ 685/- as of 25-November-19 and traded at 10.5x /9.6x /8.2x the consensus EPS for FY20E / 21E / 22E of Rs 65/71/84 respectively.
  • Consensus target price of ₹ 765/- implies a PE multiple of 9x on FY22E EPS ₹ 84/-.

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