IPO-bound Muthoot FinCorp has reduced its average cost of borrowing by 121 basis points to 9.11 per cent in FY26 from 10.32 per cent in FY25
Cheaper Borrowing For Muthoot FinCorp
Muthoot FinCorp, a Kerala-based non-banking financial company focused on gold loans, has brought down its average cost of borrowing to 9.11 per cent in FY26, a reduction of 121 basis points from 10.32 per cent in FY25. The company attributes this to a more diversified funding mix and expanded access to overseas borrowings and debt capital markets. The improvement came alongside a steady net interest margin of 12.80 per cent during the year, even as the average yield on loans eased to 21.38 per cent from 22.47 per cent in the previous year.
How The Funding Mix Changed
The composition of the company's liabilities has shifted noticeably. Overseas borrowings rose to 9.20 per cent of total borrowings as of March 2026, up from 1.65 per cent in March 2024. Commercial paper, introduced during this period, made up 8.92 per cent of borrowings by March 2026. Together, these two channels accounted for 18.12 per cent of the borrowing profile. Bank term loans remained significant at 39.69 per cent of total borrowings. The company has also used non-convertible debentures extensively, with 67 listed issuances providing an established route to debt investors.
Why It Matters For Businesses
For NBFCs and their counterparties, the case illustrates how funding diversification can lower the cost of funds without eroding margins. A lower borrowing cost supports lending capacity and pricing flexibility, which matters for borrowers and for competitors benchmarking their own cost structures. The company's CRISIL rating improved from A-/Stable in November 2016 to AA/Stable by July 2026, a shift that typically widens the pool of eligible investors and lenders. The IPO-bound entity plans to raise up to ₹3,000 crore through a fresh equity issue, with proceeds aimed at strengthening its tier-I capital base and supporting future lending. For compliance and treasury teams, the greater reliance on overseas borrowings, commercial paper and listed debt brings…
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