Muthoot Microfin

Market leadership with a pan-India presence.

Rural focused operations, with a commitment towards health and social welfare of our customers.

Brand recall and synergies with the Muthoot Pappachan Group.

Robust risk management framework leading to healthy portfolio quality.

Streamlined operating model with effective use of technology.

Access to diversified sources of capital and effective cost of funds.

Experienced and Professional Management, with Strong Corporate Governance and support from Promoters and Investors.

The microfinance industry in India faces certain risks due to the category of customers that it services, which are not generally associated with other forms of lending. As a result, the company may experience increased levels of non-performing assets and related provisions and write-offs that may adversely affect its business, financial condition and results of operations.

The company`s business is vulnerable to interest rate risk, and volatility in interest rates could have an adverse effect on its net interest income and net interest margin, thereby affecting the company results of operations.

An increase in the level of its non-performing assets or provisions may adversely affect the company financial condition and results of operations.

As a non-banking financial company - microfinance institution, the company is subject to periodic inspections by the Reserve Bank of India. Non-compliance with observations made by the Reserve Bank of India during these inspections could expose it to penalties and restrictions.

The company is subject to certain conditions under its financing arrangements, which could restrict the company ability to conduct its business and operations in the manner the company desire.

The company depends on the recognition of the "Muthoot" brand, and failure to use, maintain and enhance awareness of the brand would adversely affect its ability to retain and expand the company base of customers.

There are several outstanding legal proceedings against the Company, Directors, Promoters and Group Companies. An adverse outcome in any of these proceedings may adversely affect its reputation, business, financial condition, results of operations and cash flows.

The company face the threat of cyber-fraud and cyber-attacks, such as hacking, phishing and theft of sensitive internal data or customer information. The company also face the threat of a system breakdown, network outage and system failure. These may damage its reputation and adversely affect the company business and results of operations.

The company Corporate Promoter, MFL, is involved in other financial services related businesses and is subject to extensive regulation. Any non- compliance or perceived non-compliance by its Promoters or Directors may adversely affect the company reputation, business, results of operations and prospects.

The Directorate of Enforcement, Ministry of Finance, Government of India ("ED") has issued summons to its Managing Director directing him to provide certain information in relation to himself and the Company. There is no assurance that the ED will not take any action against it or the company Managing Director, which may adversely impact its business and operations, financial condition and reputation.

If the company is unable to manage its growth effectively, its business and reputation could be adversely affected. Further, its may not be able to sustain the growth rates the company has had since its inception.

The company derives a significant portion of its revenues from South India, and any adverse developments in the southern states of India may have an adverse effect on its business, results of operations, financial condition and cash flows.

Any disruption in its sources of funding or increase in costs of funding could adversely affect the company liquidity and financial condition.

The company is subject to laws and regulations governing the financial services industry in India and changes in laws and regulations governing it could adversely affect the company business, results of operations and prospects.

The company has experienced negative cash flows from operating, investing and financing activities in the past.

The company is unable to trace some of its historical records including minutes of the Board and Shareholders meetings and corresponding form filings. Further, certain of its secretarial records have not been adequately maintained . The company cannot assure you that no legal proceedings or regulatory actions will be initiated against the Company in the future in relation to these matters, which may impact its financial condition and reputation.

Any downgrade of its credit ratings may constrain the company access to capital and debt markets and, as a result, may adversely affect its cost of borrowings and the company results of operations.

Any non-compliance with mandatory anti-money laundering and know your customer policies could expose it to additional liability and harm its business and reputation.

To support and grow its business, the company must maintain a minimum capital to risk weighted assets ratio, and lack of access to capital may prevent it from maintaining an adequate ratio.

The company may face various risks associated with its large number of rural and semi-urban branches and widespread network of operations which may adversely affect its business, financial condition and results of operatio.

Competition from other micro-finance institutions, banks (including small finance banks) and financial institutions, as well as state-sponsored social programs, may adversely affect its profitability and position in the Indian microcredit lending industry.

The company has contingent liabilities and its financial condition could be adversely affected if these contingent liabilities materialize.

The company has entered into, and will continue to enter into, related party transactions which may potentially involve conflicts of interest.

Changes in the tenure of its loan products could result in asset liability mismatches and expose it to interest rate and liquidity risks, which may adversely affect the company business, financial condition, results of operations and cash flows.

The company non-convertible debentures are listed on the BSE and its subject to rules and regulations with respect to such listed non-convertible debentures. Additionally, as a `high value debt listed entity`, the company is are subject to additional compliances under the SEBI Listing Regulations. If its fail to comply with such rules and regulations, the company may be subject to certain penal actions, which may have an adverse effect on its business, results of operations, financial condition and cash flows.

This Draft Red Herring Prospectus contains information from third parties and from the CRISIL Report prepared by CRISIL, which the company has commissioned and paid for purposes of confirming its understanding of the industry exclusively in connection with the Offer and any reliance on such information for making an investment decision in the Offer is subject to inherent risks.

The audit reports on its audited financial statements as at and for the Financial Year 2021 contain an emphasis of matter paragraph and certain negative observations.

Any failure or material weakness of its internal control systems could cause significant operational errors, which would adversely affect its reputation and profitability.

A significant portion of its collections from customers is in cash, exposing it to certain operational risks. Further, the company may be subject to regulatory or other proceedings in connection with any unauthorized transactions, fraud or misappropriation by its representatives and employees, which could adversely affect the company business and goodwill.

Any deterioration in the performance of any pool of receivables assigned by it and other institutions may adversely affect its financial condition and results of operations.

The company require several statutory and regulatory approvals, licenses, registrations and permissions to conduct its business and an inability to obtain or maintain such approvals, licenses, registrations and permissions in a timely manner, or at all, may adversely affect its operations.

The company`s success depends, in large part, upon its management team and skilled personnel and on the company ability to attract and retain such persons. Failure to train and motivate its employees may lead to an increase in the company employee attrition rates and its results of operations could be adversely affected as a result of any disputes with its employees.

The company`s business is subject to seasonality, which may contribute to fluctuations in its results of operations and financial condition.

Its business, financial condition, cash flows and results of operations may be adversely affected by certain state regulations.

The company relies on third-party service providers who may not perform their obligations satisfactorily or in compliance with law.

The company is subject to the risks associated with all of its properties not being owned by it.

The company Promoters, Directors, Key Managerial Personnel and Senior Management Personnel may have interests other than reimbursement of expenses incurred and receipt of remuneration or benefits from the Company. Certain of its Promoters and Director may have interest in entities, which are in businesses similar to ours and this may result in conflict of interest with it.

The company insurance coverage may not be adequate to protect it against all potential losses, which may have an adverse effect on its business, financial condition and results of operations.

Concerns about terms of loans provided by it may adversely affect the company reputation and thereby the growth and the market acceptance of its products and services.

The company has availed loans which may be recalled by the lenders, subject to the terms and conditions of their grant, at any time.

The company has presented, in this Draft Red Herring Prospectus, certain financial measures and other selected statistical information relating to its financial condition and operations which are not prepared under or required by Indian GAAP. These financial measures and statistical information may vary from any standard methodology that is applicable across the financial services industry, and therefore may not be comparable with financial or statistical information of similar nomenclature computed and presented by other financial services companies.

Significant differences exist between Ind AS and other accounting principles, such as U.S. GAAP and IFRS, which may be material to investor`s assessments of its financial condition.

The company funding requirements and the proposed deployment of Net Proceeds have not been appraised and its management will have discretion over the use of the Net Proceeds.

The company will not receive any proceeds from the Offer for Sale. The Selling Shareholders will receive the entire proceeds from the Offer for Sale.

The company`s ability to pay dividends in the future will depends upon future earnings, financial condition, cash flows, working capital requirements, capital expenditures and lender consents and the company cannot assure you that its will be able to pay dividends in the future.

The company Promoters will continue to retain significant shareholding in it after this Offer, which will allow them to exercise significant influence over the company. Any substantial change in its Promoters` shareholding may have an impact on the trading price of its Equity Shares, which could adversely affect the company business, financial condition, results of operations and cash flows.

Some of its Promoters and Directors have provided personal guarantees for loan facilities obtained by third parties, and any failure or default by such third parties to repay such loans could trigger repayment obligations on them, which may impact their ability to effectively perform their obligations as its Promoters and/or Directors, as applicable, and thereby, adversely impact the company business and operations.