PROJECT REPORT ON

ASSET AND LIABILITIES MANAGAMENT IN

MUTHOOT FINCORP, NIZAMABAD
Project Report submitted to J awaharlal Nehru Technological
University, Hyderabad,
In partial fulfillment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted by:
Mr./Ms._____________________________
H.T.No._____________________________
Under the esteemed guidance of
Mr./Ms._________________________
Associate/Assistant Professor





DEPARTMENT OF BUSINESS MANAGEMENT
VIJAY RURAL ENGINEERING COLLEGE, NIZAMABAD
(Approved by AICTE, New Delhi and Affiliated to JNTU Hyderabad)
2012-2014


DECLARATION


I hereby declare that the work described in this project entitled -----------------
------------------------------------------------- carried out at ----------------------------
-------. which is being submitted by me in partial fulfillment for the award of
degree of Master of Business Administration in the Dept. of Business
Management ,Vijay Rural Engineering College , Nizamabad to the
Jawaharlal Nehru Technological University Hyderabad, Kukatpally,
Hyderabad (Telanagana.) -500 085, is the result of investigations carried out
by me under the Guidance of Mr./Ms. --------------------------------------------.

The work is original and has not been submitted in full /partial for any
Degree/Diploma of this or any other university or institution.





Place: Signature
Date:
Name of the Candidate:
Hall Ticket No.:
Email-Id:











COMPANY CERTIFICATE



























CERTIFICATE

This is to certify that the project report entitled CUSTOMER RELTIONSHIP
MANAGEMENT BIG BAZAR is being submitted by Mr./Ms.-------------------------------
(H.T.No. ------------------) in partial fulfillment for the award of the Masters Degree in
Business Administration (MBA) during the academic year 2014 to the JNTUH is a
recorded of bonafide work carried out by him/her under the guidance and
supervision.
The results embodies in this project have not been submitted to any other
university or institute for the award of any degree or diploma.

Signature of the Internal guide Signature of the HOD
( ) ( )


Signature of the External Examiner Signature of the Principal
(Dr.B.R.VIKRAM)



ACKNOWLEDGEMENT

I take this opportunity to thank all who have rendered their full support
to my work. The pleasure, the achievement, the glory, the satisfaction, the
reward, the appreciation and the construction of our project cannot be thought
without a few, how apart from their regular schedule, spared a valuable time
for us. This acknowledgement is not just a position of words but also an
account of the indictment. They have been a guiding light and source of
inspiration towards the completion of the project.
I would like to express my hearted thanks to Mr. K.Narendhar
Reddy Garu Chairman, Mrs. Amrutha Latha Garu, Secretary and Dr.
B.R.Vikram Garu, Principal- Vijay Rural Engineering College for their kind
consent to carry out this project and also providing necessary infrastructure
and resources to accomplish my project work.
I express my profound sense of gratitude to Mr.---------------------------,
Associate Professor & Head of the Department of MBA, who has kindly
permitted me to do major project in any area of my choice and providing me
all the facilities for the project.
I am deeply indebted to my project guide Mr. ----------------------------,
Assistant Professor in Department of MBA for his valuable guidance,
meticulous supervision, support and sincere advice to complete the project
successfully.
And I would like to express my sincere thanks to all the staff members
of MBA Department for their kind cooperation in completion of this project.
Finally, I thank to one and all those who have rendered help directly or
indirectly at various stages of the project and also my family members for
their care and moral support in finishing my project.
STUDENT NAME
H.T.NO
ABSTRACT






















INDEX






















LIST OF TABLES






















INTRODUCTION
Asset Liability Management (ALM) is a strategic approach of managing the
balance sheet dynamics in such a way that the net earnings are maximized.
This approach is concerned with management of net interest margin to ensure
that its level and riskiness are compatible with the risk return objectives.
If one has to define Asset and Liability management without going into
detail about its need and utility, it can be defined as simply management of
money which carries value and can change its shape very quickly and has an
ability to come back to its original shape with or without an additional growth.
The art of proper management of healthy money is ASSET AND
LIABILITY MANAGEMENT (ALM)
The Liberalization measures initiated in the country resulted in revolutionary
changes in the sector. There was a shift in the policy approach from the
traditionally administered market regime to a free market driven regime. This
has put pressure on the earning capacity of co-operative, which forced them to
foray into new operational areas thereby exposing themselves to new risks. As
major part of funds at the disposal from outside sources, the management is
concerned about RI SK arising out of shrinkage in the value of asset, and
managing such risks became critically important to them. Although co-
operatives are able to mobilize deposits, major portions of it are high cost
fixed deposits. Maturities of these fixed deposits were not properly matched
with the maturities of assets created out of them. The tool called ASSET AND
LIABILITY MANAGEMENT provides a better solution for this.
ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management
of assets and liability of an organization. This is a method of matching various
assets with liabilities on the basis of expected rates of return and expected
maturity pattern
In the context of ALM is defined as a process of adjusting s liability to meet
loan demands, liquidity needs and safety requirements. This will result in
optimum value of the same time reducing the risks faced by them and
managing the different types of risks by keeping it within acceptable levels.
RBI revises asset liability management guidelines
February 6/2012In the era of changing interest rates, Reserve Bank of
India (RBI) has now revised its Asset Liability Management guidelines. Banks
have now been asked to calculate modified duration of assets (loans) and
liabilities (deposits) and duration of equity.
This was stated by the executive director of RBI, V K Sharma, and here
today. He said that this concept gives banks a single number indicating the
impact of a 1 per cent change of interest rate on its capital, captures the
interest rate risk, and can thus help them move forward towards assessment of
risk based capital. This approach will be a graduation from the earlier
approach, which led to a mismatch between the assets and liabilities.
The ED said that RBI has been laying emphasis that banks should
maintain a more realistic balance sheet by giving a true picture of their non
performing assets (NPAs), and they should not be deleted to show huge
profits. Though the banking system in India has strong risk management
architecture, initiatives have to be taken at the bank specific level as well as
broader systematic level. He also emphasized on the need for sophisticated
credit-scoring models for measuring the credit risks of commercial and
industrial portfolios.
Emphasizing on a need for an effective control system to manage risks,
he said that the implementation of BASEL II norms by commercial banks
should not be delayed. He said that the banks should have a robust stress
testing process for assessment of capital adequacy in wake of economic
downturns, industrial downturns, market risk events and sudden shifts in
liquidity conditions. Stress tests should enable the banks to assess risks more
accurately and facilitate planning for appropriate capital requirements.
Especially among financial conglomerates. He said that RBI has already put in
place a framework for oversight of financial conglomerates, along with SEBI
and IRDA. He also said that at the systematic level efforts are being made to
create an enabling environment for all market participants in terms of
regulation, infrastructure and instruments.
NEED AND IMPORTANTS OF THE STUDY
The need of the study is to concentrates on the growth and performance of
MUTHOOT FINCORP and to calculate the growth and performance by using
asset and liability management and to know the management of
nonperforming assets.
To know financial position of MUTHOOT FINCORP
To analyze existing situation of MUTHOOT FINCORP
To improve the performance of MUTHOOT FINCORP
To analyze competition between MUTHOOT FINCORP with other
cooperatives.
SCOPE OF THE STUDY
In this study the analysis based on ratios to know asset and liabilities
management under MUTHOOT FINCORP and to analyze the growth and
performance of MUTHOOT FINCORP by using the calculations under asset
and liability management based on ratio.
Ratio analysis
Comparative statement
Common size balance sheet.


GEOGRAPHICAL SCOPE:-
The same problem was with the all other branches of MUTHOOT FIN
CORP even out of the NIZAMABAD city. The management is conducting
the same research on a big ground while my contribution is tiny.
Though my sample size and geographical area was defined and
confine to a particular territory but the application of output from the
research are going to be wide.
PRODUCT SCOPE:-
Studying the increasing business scope.
Market segmentation to find the potential customers.
To study how the various products are positioned in the market.
Corporate marketing of products.
Customers perception on the various products
OBJECTIVES OF THE STUDY

To study the concept of ASSET & LIABLITY MANAGEMENT in
MUTHOOT FINCORP
To study process of CASH INFLOWS and OUTFLOWS in MUTHOOT
FINCORP
To study RISK MANAGEMENT under MUTHOOT FINCORP
To study RESERVES CYCLE of ALM under MUTHOOT FINCORP
To study FUNCTIONS AND OBJECTIVES of ALM committee.


METHODOLOGY OF THE STUDY

The study of ALM Management is based on two factors.
1. Primary data collection.
2. Secondary data collection
PRIMARY DATA COLLECTION:
The sources of primary data were
The chief manager ALM cell
Department Sr. manager financing & Accounting
System manager- ALM cell
Gathering the information from other managers and other officials of the
organization.
SECONDARY DATA COLLECTION:
Collected from books regarding journal, and management containing
relevant information about ALM and Other main sources were

Annual report of the MUTHOOT FINCORP
Published report of the MUTHOOT FINCORP
RBI guidelines for ALM.

LIMITATION OF THE STUDY
This subject is based on past data of MUTHOOT FINCORP
The analysis is based on structural liquidity statement and gap analysis.
The study is mainly based on secondary data.
Approximate results: The results are approximated, as no accurate data is
Available.
Study takes into consideration only LTP and issue prices and their difference
for Concluding whether an issue is overpriced or under priced leaving other.
The study is based on the issues that are listed on NSE only.

ASSET LIABILITY MANAGEMENT (ALM) SYSTEM
Asset-Liability Management (ALM) can be termed as a risk management
technique designed to earn an adequate return while maintaining a comfortable
surplus of assets beyond liabilities. It takes into consideration interest rates,
earning power, and degree of willingness to take on debt and hence is also
known as Surplus Management.
But in the last decade the meaning of ALM has evolved. It is now
used in many different ways under different contexts. ALM, which was
actually pioneered by financial institutions and banks, are now widely being
used in industries too. The Society of Actuaries Task Force on ALM
Principles, Canada, offers the following definition for ALM: "Asset Liability
Management is the on-going process of formulating, implementing,
monitoring, and revising strategies related to assets and liabilities in an attempt
to achieve financial objectives for a given set of risk tolerances and
constraints."

Basis of Asset-Liability Management
Traditionally, banks and insurance companies used accrual system of
accounting for all their assets and liabilities. They would take on liabilities -
such as deposits, life insurance policies or annuities. They would then invest
the proceeds from these liabilities in assets such as loans, bonds or real estate.
All these assets and liabilities were held at book value. Doing so disguised
possible risks arising from how the assets and liabilities were structured.













REVIEW OF LITERATURE
Paper Title:-Sovereign Risk and Asset and Liability
Management Conceptual Issues (SRALM)
Authour:- G. Papaioannou, and Author I va Petrova(2000)
Findings:- Country practices towards managing financial risks on a sovereign
balance sheet continue to evolve. Each crisis period, and its legacy on
sovereign balance sheets, reaffirms the need for strengthening financial risk
management. This paper discusses some salient features embedded in in the
current generation of sovereign asset and liability management (SALM)
approaches, including objectives, definitions of relevant assets and liabilities,
and methodologies used in obtaining optimal SALM outcomes. These
elements are used in developing an analytical SALM framework which could
become an operational instrument in formulating asset management and
debtor liability management strategies at the sovereign level. From a portfolio
perspective, the SALM approach could help detect direct and derived
sovereign risk exposures. It allows analyzing the financial characteristics of
the balance sheet, identifying sources of costs and risks, and quantifying the
correlations among these sources of risk. The paper also outlines institutional
requirements in implementing an SALM framework and seeks to lay the
ground for further policy and analytical work on this topic.JEL
Paper Title: - Integrating Asset-Liability Risk Management with
Portfolio Optimization for Individual Investors II (IALRM)
Author: - Travis L. Jones, Ph.D.(2002)
Findings: - A majority of private client practitioners rely on mean-variance
optimization (MVO), rules of thumb, or model portfolios for making asset
allocation recommendations. Considerations for income levels and other
constraints figure into the typical approach. However, not enough attention is
given to the nature of an investors multiple time horizons and implications for
cash flows. These are the future demands placed upon the portfolio. The risks
that these demands will not be met need to be clearly understood in order to
validate any asset allocation decision. This study presents an approach of
incorporating MVO within a multi-horizon, asset-liability Management risk
model. This approach allows for cash-flow matching of a portion of an
investors portfolio within the optimization framework. This allows an
individuals portfolio to provide short-term cash flow, as needed, while also
considering the longer-term demands on the portfolio.
Part Title: - Asset & liability management (ALM) modeling with risk
control by stochastic dominance.
Author name: - Xi Yang, Jacek Gondzi & Andreas Grothey(2001)
Findings:-An Asset Liability Management model with a novel strategy for
controlling the risk of underfunding is presented in this article. The basic
model involves multi-period decisions (portfolio rebalancing) and deals with
the usual uncertainty of investment returns and future liabilities. Therefore, it
is well suited to a stochastic programming approach. A stochastic dominance
concept is applied to control the risk of underfunding through modeling a
chance constraint. A small numerical example and an out-of-sample back test
are provided to demonstrate the advantages of this new model, which includes
stochastic dominance constraints, over the basic model and a passive
investment strategy. Adding stochastic dominance constraints comes with a
price. This complicates the structure of the underlying stochastic program.
Indeed, the new constraints create a link between variables associated with
different scenarios of the same time stage. This destroys the usual tree
structure of the constraint matrix in the stochastic program and prevents the
application of standard stochastic programming approaches, such as (nested)
Benders decomposition and progressive hedging. Instead, we apply a
structure-exploiting interior point method to this problem. The specialized
interior point solver, object-oriented parallel solver, can deal efficiently with
such problems and outperforms the industrial strength commercial solver
CPLEX on our test problem set. Computational results on medium-scale
problems with sizes reaching about one million variables demonstrate the
efficiency of the specialized solution technique. The solution time for these
non-trivial asset liability models appears to grow sub linearly with the key
parameters of the model, such as the number of assets and the number of
realizations of the benchmark portfolio, which makes the method applicable to
truly large-scale problems.
Paper Title: - An investigation of asset liability management
practices in Kenya Commercial MUTHOOT FINCORP (IALM)
Author:- Macharia, & Irungu Peter(2003)
Findings:-
Risk management practices in commercial MUTHOOT FINCORP are commonly
known as asset liability management and it remains critical in ensuring safety of
depositors' funds as well as investors' stake. Asset liability management is a
requirement by the Central MUTHOOT FINCORP of any country in order to ensure
full compliance to the set risk management guidelines. This study was designed to
establish the asset/liability management practices by Commercial MUTHOOT FIN
CORP in Kenya and to find out the extent of asset-liability management by these
MUTHOOT FINCORP. The study will be important to commercial MUTHOOT FIN
CORP, scholars and it will contribute more knowledge to the existing information on
asset liability management. The population under study comprised of all Heads of
Treasury Operations of the 43 Commercial MUTHOOT FINCORP in Kenya. Census
study was used because the population was relatively small for sampling and gave a
better representation of the various risk management practices employed by various
commercial MUTHOOT FINCORP as well as their asset liability management
practices. Each respondent filled and submitted a self administered questionnaire that
was dropped and picked later. The questionnaire responses were summarized and the
results analyzed using Statistical data analysis programme (SPSS) to describe the
relationship between the dependent and the independent variables. Findings were
presented by way of charts, graphs and tables. Several deductions were drawn from
the findings. These included: responding MUTHOOT FINCORP employed both
conventional and MUTHOOT FINCORP-specific asset liability management
practices. Most MUTHOOT FINCORP considered credit/default risk to be the most
critical of all financial risk exposures though some empirical evidence shows that
foreign exchange risk is the most critical risk for most firms. Majority of the
MUTHOOT FINCORP did not find the Kenyan currency market to be information
efficient: speculation and forecasting techniques were extensively used by most of
them. Regular and systematic appraisal of asset/liability management policies was a
common practice amongst most MUTHOOT FINCORP. Most MUTHOOT FIN
CORP also indicated that their asset/liability management systems were governed by
guidelines set by the management board which is a cross functional outfit covering all
the major functions in the MUTHOOT FINCORP this showed that ALM is a highly
strategic issue in the MUTHOOT FINCORP Most MUTHOOT FINCORP, regardless
of their size, extensively utilized most of the conventional hedging instruments.
Micro hedge approach, accounting and economic exposure measurement strategies,
natural hedging and diversification were some of the most utilized strategies. Some
hedging practices were considered by most MUTHOOT FINCORP to be more
important than others. These included use of forward contracts and foreign currency
options as hedging instruments, and use of matching/natural hedging strategy.
Paper Title:- Industry - with Asset Liability Management in
Indian MUTHOOT FINCORP special reference to Interest
Rate Risk Management to others.
Author: - Dr. B. Charumathi
Findings:-
Assets and Liabilities Management (ALM) is a dynamic process of planning,
organizing, coordinating and controlling the assets and liabilities their mixes,
volumes, maturities, yields and costs in order to achieve a specified Net Interest
Income (NII). The NII is the difference between interest income and interest expenses
and the basic source of MUTHOOT FINCORP profitability. The easing of controls
on interest rates has led to higher interest rate volatility in India. Hence, there is a
need to measure and monitor the interest rate exposure of Indian MUTHOOT FIN
CORP. This paper entitled A Study on the Assets and Liabilities Management
(ALM) Practices with special reference to Interest Rate Risk Management at
MUTHOOT FINCORP is aimed at measuring the Interest Rate Risk in
MUTHOOT FINCORP by using Gap Analysis Technique. Using publicly available
information, this paper attempts to assess the interest rate risk carried by the
MUTHOOT FINCORP in March 2005, 2006, & 2007. The findings revealed that the
MUTHOOT FINCORP is exposed to interest rate risk .Index TermsInterest
volatility, risk, Indian MUTHOOT FINCORP
Paper Title: - Optimal Asset Allocation in Asset Liability
Management
Author:- Jules H. van Binsbergen, Michael W. Brandt
Findings:-
We study the impact of regulations on the investment decisions of a defined benefits
pension plan. We assess the influence of ex ante (preventive) and ex post (punitive)
risk constraints on the gains to dynamic, as opposed to myopic, decision making. We
find that preventive measures, such as Value-at-Risk constraints, tend to decrease the
gains to dynamic investment. In contrast, punitive constraints, such as mandatory
additional contributions from the sponsor when the plan becomes underfunded, lead
to very large utility gains from solving the dynamic program. We also show that
financial reporting rules have real effects on investment behavior. For example, the
current requirement to discount liabilities at a rolling average of yields, as opposed to
at current yields, induces grossly suboptimal investment decisions.


Paper Title: IMPORTANCE OF ASSET AND LIABILITY
MANAGEMENT IN THE NIGERIA MUTHOOT FINCORP
INDUSTRY (A CASE STUDY OF EQUITY MUTHOOT FIN
CORP LIMITED)
Authors:- faloye and andrew
Findings:-
This study examines the extent to which Asset and Liability management is crucial to
the existence and survival of a MUTHOOT FINCORP. MUTHOOT FINCORP is
confidence driven and the extent to which this confidence is secured and retained
depends on the efficiency with which MUTHOOT FINCORP asset and liabilities are
managed to the satisfaction of the various constituencies that the MUTHOOT
FINCORP serves viz: Depositors, Borrowers, Shareholders, Regulatory Authorities
and the Community. The scope of this survey is an in-depth study of the Assets and
Liabilities Management in Equity MUTHOOT FINCORP of Nigeria Limited in the
years before re-structure (1993 to 1995) and after the re-structure (1996 to 1998). The
survey will be limited to select Heads of Department and above. The survey would
also cover both the surviving members of the Equity MUTHOOT FINCORP, the
restructuring management from Nigerian Intercontinental Merchant MUTHOOT
FINCORP Limited and new members of staff after the restructure. It was found out
that the crisis of confidence in the financial system and its illiquidity is traced to the
macro-economic and political problems of the country. Government's unsuccessful
attempt to arrest the above through various measures as well as the massive looting of
the treasury led to high loan defaults and exacerbated the financial crisis and the
resulting mass liquidation of financial Institutions and commercial MUTHOOT
FINCORPs did not properly address the problem of effective Asset and liability
management and this triggered off the MUTHOOT FINCORP failures already
witnessed. It can therefore be concluded that effective asset and liability management
is critical factor in a commercial MUTHOOT FINCORP. It is of utmost necessity that
good asset and liability management policies should be in place in a capitalist society
to mobilize available resources (liabilities) and divert them to profitable instruments
(assets) to achieve MUTHOOT FINCORP viability and growth: Inefficient Asset and
Liability Management could result in MUTHOOT FINCORP failure.
Paper title:-A Financial assets and liabilities management
support system
Author: - Yung-Hsin Wang, Ta-Hua Kuo
Findings:-
This paper describes the design and implementation of a decision support system
(DSS) based on the fund dispatching decision viewpoint from the financial division of
a business group. An integrated data warehouse is established and the technique of
online analytical processing (OLAP) is applied to analyze daily transaction data of an
enterprise resource planning system with determined management goal. We adopt the
Business Dimensional Lifecycle approach to accomplish the system design and
development. The DSS system developed is to provide latest and timely information
of financial asset and liability positions in each company within the case business
group so that decision makers can have a clear decision support in fund dispatching.
While most related researches on fund dispatching focused especially on efficient
MUTHOOT FINCORP capital management and few studies were done for general
financial department of traditional enterprise let alone for the business group, this
study has made a progress in this issue and the resultant system is applicable to the
similar business group .the interest rate changing adversely, this in turn protects the
owner's equity of the MUTHOOT FINCORP. We use seven-day's reacquired interest
rate data to estimate the frequency distribution of the fluctuation of the future
market rate and solved the problem to describe the fluctuation of the interest
rate with multi-factors.







PROFILE OF INDUSTRY & COMPANY
Muthoot Finance Ltd. is the largest player in the gold loan business in
India. 76% of its business is generated from the 5 southern states in the
Country. The Company has a market share of 19.5% in the organized sector as
on FY10. It is facing major legal hurdle related to Kerala State Money lender
Act which, if implemented will substantially reduce the profitability of the
Company as Kerala accounts to 24% of Companys business. Moreover, there
is a good probability for gold price to get corrected after this prolonged bull
run which may reduce the ticket size of the loans, leading to a drop in growth
and associated profitability. We are quite bullish on the growth potential of
this firm but we would like to avoid the scrip until the abovementioned factors
are sorted out and the scrip is available at a deep discount.
INTRODUCTION OF THE MUTHOOT FINANCE LTD
Incorporated in 1997, Muthoot Finance Ltd. is Indias largest gold loan
Company. It is a subsidiary of Muthoot Group which is headquartered at
Kochi, India. It provides personal and business loans secured by gold
jewellery, or Gold Loans, primarily to individuals who possess gold jewellery
but could not access formal credit within a reasonable time, or to whom credit
may not be available at all, to meet unanticipated or other short-term liquidity
requirements. It has the largest branch network among gold loan providers in
India with 1921 branches and a strong presence in the underserved rural and
semi-urban markets. In 2010, it received a fund infusion of Rs.250 cr. from
private equity players like Baring India Private Equity, Matrix Partners India,
Kotak India Private Equity Fund and Well come Trust for a 6% stake in the
Company. In 2011, well comes Trust picked up an additional 1% stake from
the promoters, taking the total stake of private equity investors to 7%.



HISTORY - MUTHOOT FINANCE LTD

Our Company was originally incorporated as a private limited
company on March 14, 1997 with the name The Muthoot Finance Private
Limited under the Companies Act. Subsequently, by fresh certificate of
incorporation dated May 16, 2007, our name was changed to Muthoot
Finance Private Limited. The Company was converted into a public limited
company on November 18, 2008 with the name Muthoot Finance Limited
and received a fresh certificate of incorporation consequent upon change in
status on December 02, 2008 from the RoC.
Merger with Muthoot Enterprises Private Limited Our Company, along
with Muthoot Enterprises Private Limited, filed a composite scheme of
arrangement bearing C.P. Nos. 48 and 50 of 2004 under the Companies Act
before the High Court of Kerala (Scheme of Amalgamation). The Scheme of
Amalgamation was approved by the board of directors of our Company
through the board resolution dated April 28, 2004.
Pursuant to the approval of the Scheme of Amalgamation by the High
Court of Kerala by an order dated January 31, 2005, Muthoot Enterprises
Private Limited was merged with our Company, with effect from March 22,
2005 and the High Court of Kerala had instructed all the parties to comply
with the statutory and other legal requirements to make the Scheme of
Amalgamation effective.

The company on March 22, 2005 filed a certified copy of the order of
the High Court of Kerala with the RoC. With the successful implementation of
the Scheme of Amalgamation, the undertaking of Muthoot Enterprises Private
Limited along with its assets and liabilities was transferred to and vested in
our Company.




KEY EVENTS, MILESTONES AND ACHIEVEMENTS YEAR
1. 2001 RBI license obtained to function as an NBFC.
2. 2004 Obtained highest rating of F1 from Fitch Ratings for short term debt
of Rs. 200 million.
3. 2005 Retail loan and debenture portfolio of the Company exceeds Rs. 500
million.
4. Merger of Muthoot Enterprises Private Limited with the Company
5. 2006 F1 rating obtained from Fitch Ratings affirmed with an enhanced short
term debt of Rs. 400 million.
6. 2007 Retail loan portfolio of the Company crosses Rs. 10 billion.
7. RBI accords status of Systemically Important ND-NBFC.
8. Branch network of the Company crosses 500 branches.
9. Net owned funds of the Company crosses Rs. 1 billion.
10. 2008 Net owned funds of the Company crosses Rs. 2 billion.
11. Retail loan and debenture portfolio crosses Rs. 20 billion and Rs. 10
billion respectively.
12. F1 rating obtained from Fitch Ratings affirmed with an enhanced short
term debt of Rs. 800 million.
13. Overall credit limits from lending banks crosses Rs. 5 billion.
14. Conversion of the Company into a public limited company.
15. Fresh RBI license obtained to function as an NBFC without accepting
public deposits, consequent to change in name.
16. 2009 Retail loan and debenture portfolio crosses Rs. 30 billion and Rs. 15
billion respectively.
17. Net owned funds of the Company crosses Rs. 3 billion.
18. Gross annual income crosses Rs. 5 billion.
19. Overall credit limits from lending banks crosses Rs. 10 billion.
20. 2010 Retail loan and debenture portfolio crosses Rs. 50 billion and Rs. 20
billion respectively.
21. Net owned funds of the Company crosses Rs. 4 billion.
22. Overall credit limits from lending banks crosses Rs. 20 billion.
23. ICRA assigns A1+ rating for short term debt of Rs. 2 billion.
24. CRISIL assigns P1+ rating for short term debt of Rs. 4 billion.
25. Branch network of the Company crosses 1,000 branches.
26. Demerger of the FM radio business into Muthoot Broadcasting Private
Limited.
27. Private equity investment of an aggregate of Rs. 1,575.45 million from
Matrix Partners India Investments, LLC and Baring India Private Equity Fund
III Limited.
Corporate history
The Group traces its business roots to 1887 from patron founder Ninan Mathai
Muthoot. The Group is named after Mr. Mathew M Thomas (popularly known
as Muthoot Pappachan). It started with retail provisions business and then
moved into chits, finance against gold and other financial services. MPG has
diversified into other businesses including hospitality, real estate, automotive
dealerships, health and alternate energy.

Financial Services
Muthoot Pappachan Group has multiple companies under its financial services
vertical. These include:
Muthoot Fincorp
Muthoot Fincorp Limited is a proactive Systemically Important Non-Deposit
Taking Non-Banking Finance Company (NBFC) registered with the Reserve
Bank of India. The company is a mass provider of finance against gold and
other loans, with over 2600 branches pan India and has an average of 50,000
walk in customers per day. and now mpg has more than 3700 branches across
the india MFL netted a revenue of INR 15070 Million, with a profit of INR
2990 Million for FY 2011-12.
[1]

Muthoot Capital Services
Muthoot Capital Services Limited primarily offers vehicle loans, including
two-wheeler & three-wheeler loans. It has established its base in the rural and
semi-urban areas of South India and has ventured into other states like
Maharashtra, Gujarat and Goa. MCSL is listed on the Bombay Stock
Exchange with revenue of INR 670 Mio and a profit of INR 155 Mio for FY
2011-12.
[2]

Muthoot Housing Finance Company
Muthoot Housing Finance Company is an emerging home financier in India
for the lower and middle income segment and MPG plans to invest INR 1000
Mio in this venture in the near future. The company plans to set up 25
branches initially for the housing finance business and also leverage the
strength of the Groups existing base of over 1.5 million gold loan
customers.
[3]

Muthoot Mahila Mitra
Muthoot Mahila Mitra (MMM) is the microfinance arm operating under the
Groups flagship company, Muthoot Fincorp, and aims to serve the lower
sections of the society through rural women entrepreneurship, and skill
development in association with NABARD & ROPE.


Automotive
The Muthoot Papachan Group has automotive dealerships in various locations
across Kerala. It has dealerships of Jaguar, Land Rover, Honda cars,Honda
and Yamaha bikes.
[5]

Hospitality
Muthoot Plaza, the one of its kind star hotel in Trivandrum
(Thiruvananthapuram) is to become the Hilton Garden Inn. The hotel
reopened on 27 December 2013 after renovation as Hilton Garden Inn with
127 rooms in the business class hotel category. The iconic Vivanta by
Taj (previously known as Taj Green Cove) at Kovalam, is one of the
internationally renowned Taj Hotels and also one of the jewels in MPGs
Hospitality Crown. MPG's upcoming properties include three business-class
hotels and one five-star resort, to be located in Chennai and Kochi. A luxury
serviced apartment is under development in Trivandrum. The Muthoot
Skychef, with a facility spread over 32,000 sq ft, serves airlines such as Air
India, Indian Airlines and Qatar Airways, and charters and VVIP flights.
[6]

Real Estate
MPG Hotels and Infrastructure Ventures is a real estate development company
headquartered in Trivandrum. The Group is currently developing 6 hotels, to
be operated by international brands, as well as commercial and residential
spaces in India. Muthoot Technopolis, located in Kochi, is an IT park, with a
built-up area of 355,000 square feet wherefrom global IT Majors are
operating.
[7]

Alternate Energy
MPG has been setting up wind farms in Tamil Nadu, India since 1993. The
total installed capacity in wind power is 25 mega watts, with an investment of
INR 1250 Mio. MPG has put plans in place to double its wind power
generation capacity in the near future.
Entertainment
The Group owns the 943 seater DTS Sound Kripa Cinema in Trivandrum.
Muthoot Fincorp Limited, the flagship Company of the Muthoot Pappachan
Group (MPG) ; established in 1887, the Muthoot Pappachan Group (MPG) is
a diversified conglomerate with an overwhelming presence in multiple
verticals. A journey of a thousand miles begins with a single step. True to this
adage, the group planted its roots in retail trading and later diversified into
various sectors including Financial Services, Hospitality, Automotive, Real
Estate & Infrastructure, IT Services, Healthcare, Precious Metals, Global
Services and Alternate Energy .
Over the years MPG has grown to become a significant entity in the Indian
business landscape. Currently it has an army of 20,000 employees, serving
over a million customers. MPG's customer-centric approach an innovation in
terms of new products that cater to changing customer needs have helped in
winning the loyalty of innumerable customers, as well as attracting new ones.
Adapting the latest technology and new ways to serve the customers without
compromising on basic principles and ethics, that it has been following since
its inception, is the backboneof Muthoot Pappachan Group. MPG has grown
to encompass unimaginable proportions.

The Muthoot Pappachan Group has established a business without boundaries,
where challenges are considered stepping stones to progress. MPG strives to
take the world forward and with ambition at work, the possibilities are
infinite!

Muthoot Fincorp is a finance company that caters to the financial needs of
retail and institutional customers. We are registered with the Reserve Bank of
India as a systemically important non-deposit taking non-banking finance
company (NBFC) with a paid up capital of Rs 186.56 Crores and a Net Worth
of Rs 1249.85 Crores as on 31-03-2014. At Muthoot Fincorp Limited, we are
focused on providing a host of financial services. Our services comprise of a
mix of retail offerings in the areas of gold loan & other loan products
including Auto loans, Home Loans, Micro Finance Loans, Investment
products. We have been offering these services to our customers across India
with a wide network of over 3800 branches. We believe in three parameters
when it comes to financial services delivery, i.e. people, process &
technology. Heavy investments have been made in these three parameters, and
we expect these would propel our progress as a global retail financial
conglomerate.

Muthoot Pappachan Foundation
Philosophy & Outlook
Muthoot Pappachan Foundation (MPF), a Public Charitable Trust was formed
in the year 2003 as the CSR arm of the Muthoot Pappachan Group to facilitate
CSR activities for the entire Group.
Planning and implementing various CSR activities towards the set objectives
of the organization and facilitate the CSR programmes through various group
companies of MPG, is the major responsibility of MPF.
CSR objectives of the Muthoot Pappachan Group
1. To build a framework of CSR activities with a philanthropic approach in
line with business unit objectives, which also benefits the organization at
large
Social returns together with financial returns, while imbibing the
organisation's ethos and value systems.
Build sustainability for the organization by 'Engaging the Community.'
To build a corporate brand through CSR
For other stakeholders make it "an integral part of the company's DNA, so
much so that it has to be an organic part of the business ".
CSR Theme
Sustainability is the new interest zone in the CSR space; wherein MPG is
looking to partner projects that ensure sustainability in the long term. MPF
will be planning and implementing strategic CSR initiatives which would be a
blend of philanthropy and business; looking for the combined social and
economic benefit of all stakeholders.
The benefits foreseen through the strategic CSR efforts are:
To effectively communicate the organization's goals and direction
Enhanced brand value and reputation
Long-term sustainability for the organization and society
Improved financial performance
Build the relationship with businesses in the community and with local
authorities
Good relations with government and communities
A license to operate
With a long term and futuristic perspective, the entire range of CSR activities
undertaken by the various group companies are streamlined through Muthoot
Pappachan Foundation. The CSR programs of Muthoot Pappachan Foundation
are bound by the theme- HEEL
Health
Education
Environment
Livelihood
All the MPG companies will be leading their own CSR initiatives within the
HEEL themes, specifically involving their staff and customers. MPF facilitates
this process. Other than directly MPF-run CSR initiatives, activities would be
initiated from the following divisions:
Finance (MPG NBFCs)
Hospitality
Real Estate
Automobiles
Healthcare (Life Brigade Hospital)
The stakeholders of MPG can be categorized as follows:
Customers
Employees
Corporate
Other stakeholders (NGOs, Corporate partners)
Govt. sector
Public
Marginalized Communities

Major CSR Initiatives within the HEEL Themes:
1. The Streejyoti Program
(Micro-Finance Team) - Livelihood Theme
Objective: To ensure competitiveness through the development of managerial
skills of the members, which in turn, would translate to higher incomes and
better lifestyles?.
Streejyoti is a joint initiative of the Muthoot Pappachan Group and Accion
International created to educate budding women entrepreneurs and help them
be financially literate.This programme has coverage in Kerala, Karnataka and
Tamil Nadu and more than 25,000 women entrepreneurs have been trained to
date.
2. Muthoot Life Blood Directory
(Muthoot Fincorp Ltd & Medicare) - Health Theme
Muthoot Pappachan Lifeblood Directory creates a platform for all the good
souls that are willing to donate blood and save precious lives. We are targeting
to create the largest Donor Directory in the country involving our stakeholders
from all the MP Group companies.
This Directory was piloted in Kerala from 1
st
October 2012 (National Blood
Donor Day) through the 800+ MFL branches across the state. So far around
30,000+ Donors have voluntarily registered in the Directory. A help desk at
Head office, Trivandrum facilitates the process of donor management and
helps patient-donor interface to get connected to concerned MFL branches in
their city
3. Medical Camps
(Muthoot Fincorp Ltd) - Health Theme
This year, MFL's branches conducted over 200 eye check-up camps, in
partnership with various eye hospitals in the state.
Free check up and cataract surgeries (IOL) were offered to staff, families and
customers. Also, a subsidy was offered on selected services from these
hospitals in case of extended treatments.
There is a good demand for eye camps and other medical camps from rural
areas and MPF is taking efforts to extend it to other states too.
4. Adoption of Villages (Educational Support for children)
(Hospitality & MFL) - Education
Two villages have been adopted for providing educational support for children
from economically deprived families.
Konni (Pathanamthitta)
Panathura (Thiruvananthapuram)
This programme is facilitated by Rajagiri out REACH, the extension wing of
Rajagiri School of Social Sciences.
5. Disability and Rehabilitation
(Medicare) - Health Theme
Swasraya Training and Rehabilitation Centre
Paraplegia (total or partial crippling below the waist on account of spine
injuries) is an affliction tormenting the lives of hundreds of people in Kerala.
Road accidents and accidental falls from trees or high-rise buildings are the
causative reasons, and tragically most victims come from the 15-45 age groups
belonging to low-income families. Swasraya provides support for these
individuals in various forms.
MPF supports Swasraya in developing their infrastructure for the
rehabilitation centre in Mulanthuruthi.

Vision Statement

To be The Most Trusted Financial Service Provider,
at the Doorstep of the Common Man,
Satisfying him Immediately with
Easy and Simple Products.

Alliance Partners
We have strategic alliances with leading companies which offers our
customers access to premium services at affordable costs.

Western Union Money Transfer
Money Transfer

Franklin Templeton
Mutual Funds

Ezremit Money Transfer
Money Transfer

Xpress Money
Money Transfer

Money Gram Money Transfer
Money Transfer

Trans Fast Money Transfer
Money Transfer

HDFC Mutual Fund
Mutual Fund

IDFC Mutual Fund
Mutual Fund

1. Corporate Ethos

Let us not judge ourselves by the profit we make but by the trust and the
confidence that people have in us. Let us cherish and nurture that trust and
ensure that every person who deals with us deals with the confidence that he
will not be misguided but his interests will be carefully protected.
Even before the word ethos found a place in the corporate lexicon, Muthoot
Finance Ltd. imbibed a work culture based on conscience. Since its inception,
the company has nurtured trust as its most prominent value. We are committed
to keep this heritage alive throughout the generations to come.
At Muthoot Finance Ltd. we are committed to creating a balance. We believe
in a simple yet profound theory of from excess or scanty, to appropriateness.
A prominent example of this is our financial inclusion policy. The company
provides gold loan on extremely easy terms and conditions to people of each
segment of the society. Our gold loan range begins at Rs. 1500 and extends to
a maximum of Rs. 1cr. Driven by the invaluable trust and commitment that
people have shown in us through centuries, we created a reputable market
image.
Our Values
Being a prominent venture of the Muthoot Group, Muthoot Finance Ltd.
carefully and passionately imbibes the values of the former. Our take pride in
our strong foundation which is deeply rooted in the following pillars :
Ethics: Our main aim is to put the needs of the customer first before
anything else. We strive to provide you with the best quality of service
under the Muthoot Brand Umbrella and we do the same with a smile.
Values: Accountability for all our operations & services and towards the
society makes us a socially responsible and intelligent citizen. Our empire
has grown leaps and bounds on the basis of these values. The times may
change, but our values will remain unchanged.
Reliability: With an unblemished track record throughout the markets we
serve; and across national as well as global boundaries, Muthoot Finance
values its commitment to customer-service.
Dependability: We do not judge ourselves by the profit we make but by
the trust and confidence that people have shown in us for the past 127
years. Over 6 million people have turned to us for help in their hour of
need just because of this guiding principal of ours.
Trustworthiness: We pledge loyalty in our operations, fairness in our
dealings and openness in our practices. At Muthoot Finance Ltd., we
embrace policies and practices that fortify trust.
Integrity: The value is innate to a corruption-free atmosphere and an open
work culture. We at Muthoot Finance Ltd. therefore cultivate transparency
as a work ethic.
Good Will: Muthoot Finance serves more than 6 million customers across
the country. We add over 81000 customers each day to our customer base.
With an unmatched goodwill, the company shoulders the responsibility of
creating a deserving brand image
Muthoot Fincorp (MF) was established to unify all group businesses
pertaining to the Non-Banking Financial Sector. MF is today counted among
the premier financial institutions in South India, with over 360 branches
offering a whole gamut of products and services including Gold Loan,
Debentures, Swarnavarsham, Life Insurance, General Insurance, Home Loan,
Auto Loan, Money Transfer and Investment Solutions to meet the lifetime
needs of customers

BACKGROUND - MUTHOOT FINANCE LTD
Muthoot finance is a flagship company of the Muthoot Group based in
Southern India. The group has a presence in diverse businesses including
financing, healthcare, real estate, education, hospitality, forex, wealth
management services, money transfer services, power generation and
entertainment.
Muthoot Finance Ltd (MFL), incorporated in 1997, is the Kerala based
largest gold financing company in India in terms of loan portfolio. The
company offers gold loan to individuals like small businessmen, vendors,
traders, and salaried individuals who cannot access formal credit for reasons
like lack of credit history, documentation, accessibility. The company
generally gives small ticket loans (average ticket size of ~`31000) with a tenor
not exceeding one year, thereby limiting interest risk and asset-quality
concerns. The loan-to-value varies from 60%-85%. Muthoot Finance Gold
Loan portfolio as of November 30, 2010 comprised approximately 4.1 mn
loan accounts in India which it serviced through 2263 branches across 20
states. The company has further increased its branch network to 2611 branches
as of February 28, 2011, servicing an average of 67,953 customers per day in
the month of February 2011. As of February 28, 2011, the company has
employed 15,664 persons. Other then Gold Loans business, the company
provides money transfer services through their branches as sub-agents of
various registered money transfer agencies.
PRODUCT AND SERVICES OF THE MUTHOOT FINANCE
1. GOLD LOAN

Muthoot Finance, Indias largest gold loan company is the first choice of
Indians who want to make their dream a reality. May the dream be to start
their own business or to buy their own home, for over 124 years Muthoot
Finance has helped almost every Indians dream come true. Trusted by over
70000 customers every day, Muthoot Finance Gold Loan has services and
products that fit the need of any customer, making it the quickest, most
convenient and safest way to take a gold loan.
Key features of Gold Loan:
Loan disbursal in 5 minutes
Loans starts from 1,500 to 1 Crore
Minimal documentation and credit assessment requirements
High quality customer service in short response time
Evaluation of gold ornaments takes place in house.
Safety of Gold Ornaments: All branches as equipped with Strong
Rooms for keeping safe custody of Gold Ornaments
Gold Loan available at over 3,000 Muthoot Finance branches across
India
0% processing fees
Pre-payment option-without any penalty

GOLD LOAN SCHEMES
Scheme Name Value (per gram) Interest (% p.a.)
True Value Personal Loan (TPL) Rs. 1,035/- 12%
Super Value Personal Loan (SPL) Rs. 2,260/- 24%
Real Value Personal Loan (RPL) Rs 1,960/- 18%
Express Personal Loan (XPL) Rs. 2,090/- 21%

2. GOLD COINS
Now invest your wealth in the ever rising power of Gold with the Muthoot
Precious Metals Corporation. 24 carat Pure Gold Coins: Muthoot Precious
Metals Corporation presents Gold Coins with 999% purity (24 Carat). Invest
in safe, secure and profitable Gold Coins.
The Gold Coins hold many advantages:
999% pure
Finance schemes with easy monthly installments
Appreciating asset
Higher return on investment with no risks
Available in denominations such as 2g, 4g, 8g, 20g and 50g to suit
every pocket.
The ideal gift for your near and dear ones
Silver Coins
999% pure Silver Coins
One of India's few financial players that deals in Silver Coins
Available in 50 gm and 100 gm
Available at over3, 000 Muthoot Finance brances across India

3. MONEY TRANSFER
One of the finest Money Transfer services in India, with over 700,000
transfers annually, Muthoot Money Transfer is the largest payout centre in
India. Muthoot Money Transfer allows real time money transfers from across
the seas, with the money reaching the receiver in less than 10 minutes. The
money can be transferred from First Remit/Coinstar, Xpress Money, Ez
Remit, Money Gram, Royar Money, Global Money Transfer, Western Union,
Transfast, Instant Cash and even Muthoot Finances own branches abroad.
The service boasts low costs, high exchange rates and NO additional service
charge to the receiver.
The key highlights of this service are:
Fastest Money Transfer facility
No bank account needed for amounts up to Rs. 50,000
The receiver does not have to pay any service charge
Certified by the RBI
Access it in any of the 3000 branches across the country

4. FOREIGN EXCHANGE
Muthoot Foreign Exchange offers you currency exchange facilities as well as
allows you to buy and sell foreign currency and Travellers cheques with
Muthoot Foreign Exchange service. With the wide network of almost 3000
branches, we ensure ease of transaction. Muthoot Foreign Exchange helps you
get competitive rates for all currencies and notes in 35 major currencies as
well as 100 miscellaneous ones!
A few features of our Foreign Exchange service:
Buying and selling of all major Travellers cheques and Travel Cards
Commission free encashment of Travellers cheques
Competitive rates for all currencies
Remittance of funds abroad for various purposes

5. MPOWER CARD
Your life is made infinitely easier with the Muthoot MPower Card, which is
a unique identity card with numerous benefits:
Access it anywhere in India
Earn Loyalty Points on every transaction at ANY Muthoot branch
Redeem these Loyalty Points for attractive gifts
Get Rs. 20 per gram extra on Gold Loan
Keep all your jewelry in our lockers free of cost (No locker charges!)
Rs. 50,000 Personal Accident Insurance coverage
Deposit and withdraw money from any branch on Real Time
Special overdraft scheme for MPower Cardholders.



6. TRAVEL SMART
Within just a few months of its launch Muthoot Travel smart has already
become one of the leading IATA (International Air Transport Association)
accredited agencies and has got certified by IRCTC. Muthoot Travel smart
offers all the services of a travel agency and more, such as travel insurance
and foreign exchange Muthoot Travel smart carries forward the groups core
values of helping India make the right decision with their money by helping
you during your travels, both familial and official. In addition to the 3000
branches of Muthoot Finance in India, the services of Muthoot Travel smart
can be accessed in 6 offices overseas as well.
The services offered under Travel smart include:
International & Domestic Ticketing
Railway Ticketing
Tours
Passport, Emigration & Visa
Travel Insurance


VALUE ADDITION IN PRODUCT AND SERVICES OF THE
MUTHOOT FINANCE LTD
We have challenged ourselves to perform better than the best. We have
now launched a new venture in Gold Financing, offering Customers loan
against the security of Gold Exchange Traded Funds (ETFs) units. This will
not only add value to the services but also enable the Company to service
financial requirements of new Customer segment.
The visionary zeal, constant innovation and customer-oriented product
& service delivery deployed at every phase of its growth are indeed
exemplary. And Muthoot Group is now all set to go places, backed by its
assets built by extraordinary people and high values.
With the guiding principles of honesty, sincerity, confidence and service,
Muthoot Group has indeed come a long way. These values continue to drive
all business decisions of the Group Companies. With customer-centric
products and services to offer, the Group has been constantly innovating and
evolving to deliver superior products, transparent workplace practices, easy
accessibility and personalized services at all levels. Perhaps why, Muthoot
Group has earned the trust of millions of customers and associates across the
country.
1. Muthoot Finance launches new gold loan scheme

Indian non-banking finance company (NBFC) Muthoot Finance Ltd
Friday announced the launch of a new gold loan scheme that will provide
loans to public against the security of Gold Exchange Traded Fund (ETF)
across the country.
The new scheme Gold ETF Loan Scheme which will be made
available to the customers by July-end 2011 will help customers get loan
against their Gold ETF units to the extent of 85% of the net asset value (NAV)
of ETFs, said a press release issued by Muthoot Finance.
Gold ETFs are mutual fund units issued by Asset Management
Companies against 995 purity physical gold. They are listed and traded on
stock exchanges and can be bought and sold like stocks on a real-time basis.
Gold ETFs were valued at Rs 50 billion as of June 2011.
Loan against Gold ETF is a scheme through which Muthoot Finance
plans to venture into totally new segment of gold financing which would not
only add value but also enable the company to service the financial
requirements of newer customer segments, said George Alexander Muthoot,
managing director of Muthoot Finance during the launch.

2. MUTHOOT FINANCE LAUNCHES THE WESTERN
UNION

MONEY TRANSFER
SM
SERVICE:
May 27, 2011, Kochi, India: International money transfer consumers across
Kerala - Indias foremost remittance driven economy will now be able to
receive their Western Union Money TransferSM transactions from Muthoot
Finance - a leading Kerala based financial institution.
Muthoot Finance will now offer Western Union Money Transfer
services from its countrywide network of 2800 locations linking them to
Western Unions network of more than 400,000 locations in over 200
countries and territories across the world.
Launching the service, Mr George Alexander Muthoot Managing
Director, Muthoot Finance Ltd said, Here, on this occasion, three of the
biggest players of the Indian Financial Services industry have come together
with the intention of providing a premium money transfer service to customers
across the country.
Muthoot Finance Ltd., through its extensive network of branches, aims
to capitalize the huge potential of the money transfer business in India.
With its expansive global network, Western Union is uniquely
positioned to deliver fast, reliable and convenient money transfer services to
consumers across remote geographical locations globally.
Through our agreement with Western Union we have facilitated a
number of classes of trade including retail and banks to offer Western Union
Money Transfers services to the remotest corners of India. The collaboration
with Muthoot Finance is one more step in this direction which would
positively impact people across the 2,800 branches offering the service,

History of GOLD loan
Gold is a brilliant yellow precious metal that is resistant to air and water
corrosion. It is a very soft and pure metal. Gold is the most malleable and
ductile metal found on earth. Thats why it is expensive and it is alloyed with
other metals, usually copper and silver to make it less expensive and harder, a
karat is the unit that measures the purity of gold jewellery or else it is
hallmarked with a three digit number that indicates the parts per thousand of
gold. Some countries hallmark gold with a three digit number that indicates
the parts per thousand of gold. The alloyed gold comes in many colours and
may not be bright yellow all the time. It has long been a values commodity,
particularly in India where it is considered auspicious, and had been in use for
centuries in the form of jewellery, coins, bullions, electronics, and dentistry,
also for other medical purposes. Though gold is a highly liquid asset, it wasnt
until recently that consumers leveraged it effectively to meet their liquidity
needs.
Lenders provide loans by securing gold assets as collateral. Compared with the
rest of the world in India the gold loan market is big business. Until a decade
back, most of the lending was in the unorganized sector through pawnbrokers
and money lenders. However this scenario changed with the entrance of
organized sector players such as banks and non banking finance companies
(NBFCs) which now command more than 25% of the market. The organized
gold loan market has grown at 40% CAGR form 2002 to 2010. NBFCs have
been a major driving force behind this growth given their extensive network.
Faster turnaround time, higher loan to value ratios and the ability to serve non-
bankable customers. Of late, banks have improved their gold loan product
features and services. Coupled with comparatively lower interest rates
charges, bank stand to gain market share at the expanses of NBFCs in the near
future.
The eligibility criteria required to apply for gold lone in India includes three
factors. Firs-tly, the person has to be above 18 years of age. Secondly, the
person applying or a gold loan in India should have a ID & address proof and
last but not the least the applicant should be working on a regular salary basis ,
means there should be a constant flow of income.
BACKGROUND: GOLD AND THE INDIAN SOCIETY
Gold has traditionally been among the most liquid asset and is an accepted
universal currency. it has traditionally been consumed by individuals in the
form of jewellery, especially in India were it is considered auspicious. Gold is
presumed to be a safe haven in times of economic uncertainty, a fact
exemplified by a 30% increases the value of gold over the past year India is
one of the largest market of gold accounting for approximately 10% of the
total world gold stock as of 2010. Rural India accounts for 65% of this gold
stock. Though gold price have increased 19% CAGR from 2002 to 2010, gold
stock in India has grown at 22% CAGR During the same period to 18000 tons
(Rs.32000 billion). The demand for gold has followed a regional trend with
southern India accounting for 40% of annual demand, followed by the west
(25%), north (20-25%) and east (10-15%).
Looking for Gold Loan Market
The Key Players in the Indian gold loan market include the unorganized
sector, banks _ public/private/cooperatives and NBFCs. While the
unorganised sector, comprising local pawnbroker and money leader has
traditionally dominated the gold loan market for money decades and still
commands nearly 75% of the market the organized sector led by NBFCs is
catching up fast. The organized sector has grown at rapid paces of 40% CAGR
form the 2002 to 2010 and is expected to grow by 33% to41% CAGR in 2011
And in doing so these companies are challenges the dominance of the large
unorganized sector within the organized sector, NBFCs have grown at a repaid
rate from 18.4% in FY to 32.2% in FY10. (Source: cognizant 20-20 insight
jan.2012)
Muthoot finance
With a tagline loan in just 5 minutes muthoot fiancs is a Indias largest gold
loan company & is the fast choice of Indian who want to make their dream a
reality. May the dream be to start their own business or to buy their own
home: muthoot finance has helped almost every Indians dream come true,
trusted by over 76000 customer every day muthoot finance gold loan has
services and products that fit the need of any customers, making it the quickest
,most convenient and safest way to take gold loan
Headquartered in the southern Indian state of Kerala, their operating history
has evolved over a period of 72 since M George muthoot (the father of our
promoter) founder a gold loan business in 1939 under the heritage of a
treading business established by his father, ninan mathai muthoot in 1987.
since our formation, we have broadened the scale and geographic scope of
their retail leading operation so that, as of march 31, 2008, 2009, 2010, 2011
and in the period ended September 30, 2011 revenue from their gold loan
business constituted 95.97% 96.71% 98.08% 98.75% and 99.01% respectively
, of their total income,



















DATA ANALYSIS AND INTERPRETATION

ASSET LIABILITY MANAGEMENT (ALM) SYSTEM
Asset-Liability Management (ALM) can be termed as a risk management
technique designed to earn an adequate return while maintaining a comfortable
surplus of assets beyond liabilities. It takes into consideration interest rates,
earning power, and degree of willingness to take on debt and hence is also
known as Surplus Management.
But in the last decade the meaning of ALM has evolved. It is now
used in many different ways under different contexts. ALM, which was
actually pioneered by financial institutions and MUTHOOT FINCORP, are
now widely being used in industries too. The Society of Actuaries Task Force
on ALM Principles, Canada, offers the following definition for ALM: "Asset
Liability Management is the on-going process of formulating, implementing,
monitoring, and revising strategies related to assets and liabilities in an attempt
to achieve financial objectives for a given set of risk tolerances and
constraints."
Basis of Asset-Liability Management
Traditionally, MUTHOOT FINCORP used accrual system of accounting
for all their assets and liabilities. They would take on liabilities - such as
deposits, life insurance policies or annuities. They would then invest the
proceeds from these liabilities in assets such as loans, bonds or real estate. All
these assets and liabilities were held at book value. Doing so disguised
possible risks arising from how the assets and liabilities were structured.
Consider a MUTHOOT FINCORP that borrows 1 Crore (100 Lakhs) at 6
% for a year and lends the same money at 7 % to a highly rated borrower for 5
years. The net transaction appears profitable-the MUTHOOT FINCORP is
earning a 100 basis point spread - but it entails considerable risk. At the end of
a year, the MUTHOOT FINCORP will have to find new financing for the
loan, which will have 4 more years before it matures. If interest rates have
risen, the MUTHOOT FINCORP may have to pay a higher rate of interest on
the new financing than the fixed 7 % it is earning on its loan.
Suppose, at the end of a year, an applicable 4-year interest rate is 8 %.
The MUTHOOT FINCORP is in serious trouble. It is going to earn 7 % on its
loan but would have to pay 8 % on its financing. Accrual accounting does not
recognize this problem. Based upon accrual accounting, the MUTHOOT
FINCORP would earn Rs 100,000 in the first year although in the preceding
years it is going to incur a loss.
The problem in this example was caused by a mismatch between
assets and liabilities. Prior to the 1970's, such mismatches tended not to be a
significant problem. Interest rates in developed countries experienced only
modest fluctuations, so losses due to asset-liability mismatches were small or
trivial. Many firms intentionally mismatched their balance sheets and as yield
curves were generally upward sloping, MUTHOOT FINCORP could earn a
spread by borrowing short and lending long.
Things started to change in the 1970s, which ushered in a period of volatile
interest rates that continued till the early 1980s. US regulations which had capped
the interest rates so that MUTHOOT FINCORP could pay depositors, was abandoned
which led to a migration of dollar deposit overseas. Managers of many firms, who
were accustomed to thinking in terms of accrual accounting, were slow to recognize
this emerging risk. Some firms suffered staggering losses. Because the firms used
accrual accounting, it resulted in more of crippled balance sheets than MUTHOOT
FINCORP
Interest Rate Risk:-
Interest Rate Risk refers to the risk of changes in interest rates
subsequent to the creation of the assets and liabilities at fixed rates. The
phased deregulations of interest rates and the operational flexibility given in
pricing most of the assets and liabilities imply the need for system to hedge the
interest rate risk. This is a risk where changes in the market interest rates
might adversely affect financial conditions.

The changes in interest rates affects in large way. The immediate impact of
change in interest rates is on earnings by changing its Net Interest Income (NII). A
long term impact of changing interest rates is on Market Value of Equity (MVE) or
net worth as the economic value of assets, liabilities and off-balance sheet positions
get affected due to variation in market interest rates.
The risk from the earnings perspective can be measured as changes in
the Net Interest Income (NII) OR Net Interest Margin (NIM).

There are many analytical techniques for measurement and
management of interest rate risk. In MIS of ALM, slow pace of
computerization in and the absence of total deregulation, the traditional GAP
ANALYSIS is considered as a suitable method to measure the interest rate
risk.

Data Interpretation
Gap Analysis:-
The Gap or mismatch risk can be measured by calculating Gaps over different
time buckets as at a given date. Gap analysis measures mismatches between rate
sensitive liabilities and rate sensitive assets including off-balance sheet position.
An asset or liability is normally classified as rate sensitive if:
If there is a cash flow within the time interval.
The interest rate resets or reprocess contractually during the interval.
RBI changes the interest rates i.e., on saving deposits, export credit,
refinance, CRR balances and so on, in case where interest rate are
administered.
It is contractually pre-payable or withdraw able before the stated maturities

The Gap is the difference between Rate Sensitive Assets (RSA) and Rate
sensitive Liabilities (RSA) for each time bucket.
The positive GAP indicates that RSAs are more than RSLs (RSA>RSL).
The negative GAP indicates that RSAs are more than RSALs (RSA<RSL).
They can implement ALM policies for the better identification of the
mismatch, risk and for the implementation of various remedial measures.

GENERAL:-
The classification of various components of assets and liabilities into
different time buckets for preparation of Gap reports (Liquidity and interest rate
sensitivity) may be done as indicated in Appendices I & II as a sort of bench mark,
which are better equipped to reasonably estimate the behavioral pattern,
embedded options, rolls-in and rolls-out etc of various components of assets and
liabilities on the basis of past date. Empirical studies could classify them in the
appropriate time buckets, subject to approval from the Muthoot FINCORP / Board. A
copy of the note approved by the ALOC / Board may be sent to the Department of
Supervision.
The present framework does not capture the impact of embedded
options, i.e., the customers exercising their options (premature closure of
deposits and prepayment of loans and advances) on the liquidity and interest
rate risks profile. The magnitude of embedded option risk at times of volatility
in market interest rates is quite substantial should, therefore evolve suitable
mechanism, supported by empirical studies and behavioral analysis to estimate
the future behavior of assets; liabilities and off-balance sheet items to changes
in market variables and estimate the embedded options.
A scientifically evolved internal transfer pricing model by assigning values on
the basis of current market rates to funds provided and funds used is an imported
component for elective implementation of ALM systems. The transfer price
mechanism can enhance the management of margin i.e., landings or credit spread
the funding or liability spread and mismatch spread. It also helps centralizing
interest rate risk at one place which facilitates effective control and management of
interest rate risk. A well defined transfer pricing system also provides a rational
framework for pricing of assets and liabilities.
COMPARATIVE ASSET LIABILITY SHEET AS ON 31
ST
MARCH
2012-13


As at 31-Mar-13 As at 31-Mar-12
ABSOLUTE
INCREASE/
DECREAES
CHANGE
IN %
CAPITAL AND
LIABILITIES

Capital 4,652,257 4,577,433 74,824 1.634627967
Reserves and Surplus 249,111,291 210,618,369 38,492,922 18.27614665
Employees Stock Options
(Grants) Outstanding
Deposits
2,085,864,054 1,674,044,394 411,819,660 24.60028309
Borrowings 143,940,610 129,156,925 14,783,685 11.44629682
Other Liabilities and
Provisions
289,928,565 206,159,441 83,769,124 40.63317382

2,773,525,565 2,224,585,697 548,939,868 24.67604951
ASSETS

Cash and Balances with
Reserve Bank of India
251,008,158 154,832,841 96,175,317 62.11557986
Balances with Banks and
Money at Call and Short
notice
45,680,191 144,591,147 -98,910,956 -68.40733894
Investments 709,293,656 586,076,161 123,217,495 21.02414382
Advances 1,599,826,654 1,258,305,939 341,520,715 27.14130995
Fixed Assets 21,706,480 21,228,114 478,366 2.253455017
Other Assets 146,010,773 59,551,495 86,459,278 145.1840596

2,773,525,912 2,224,585,697 548,940,215 24.67606511
Contingent Liabilities 5,751,224,839 4,790,515,044 960,709,795 20.05441557
Bills for Collection 134,284,924 81,248,646 53,036,278 65.27650688




Interpretation:

The total current liabilities for the year are Rs.206159441 is less than the total
assets for the year are Rs.2224585697. Therefore the assets are more than the
liabilities. So there is a positive gap of Rs.548939688 i.e 24.67%

-1,000,000,000
0
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
COMPARATIVE ASSET LIABILITY SHEET AS ON 31
ST
MARCH 2011-12


As at 31-Mar-12 As at 31-Mar-11
ABSOLUTE
INCREASE/
DECREAES
CHANGE
IN %
CAPITAL AND
LIABILITIES

Capital 4,577,433 4,253,841 323,592 7.607054424
Equity Share Warrants

4,009,158 -4,009,158 -100
Reserves and Surplus 210,618,369 142,209,460 68,408,909 48.10433075
Employees Stock Options
(Grants) Outstanding
29,135 54,870 -25,735 -46.90176781
Deposits 1,674,044,394 1,428,115,800 245,928,594 17.22049388
Borrowings 129,156,925 91,636,374 37,520,551 40.9450411
Other Liabilities and Provisions 206,159,441 162,428,229 43,731,212 26.92340628

2,224,585,697 1,832,707,732 391,877,965 21.38245822
ASSETS

Cash and Balances with
Reserve Bank of India
154,832,841 135,272,112 19,560,729 14.4602821
Balances with Banks and
Money at Call and Short notice
144,591,147 39,794,055 104,797,092 263.3486133
Investments 586,076,161 588,175,488 -2,099,327 -0.356921878
Advances 1,258,305,939 988,830,473 269,475,466 27.25193786
Fixed Assets 21,228,114 17,067,290 4,160,824 24.37893772
Other Assets 59,551,495 63,568,314 -4,016,819 -6.318901269

2,224,585,697 1,832,707,732 391,877,965 21.38245822
Contingent Liabilities 4,790,515,044 4,059,816,885 730,698,159 17.99830336
Bills for Collection 81,248,646 85,522,390 -4,273,744 -4.997222365





Interpretation:
The total current liabilities for the year are Rs.43731212 is less than the total
assets for the year are Rs.1832707732. Therefore the assets are more than the
liabilities. So there is a positive gap of Rs. 391877965 i.e 21.38%







-1,000,000,000
0
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
COMPARATIVE ASSET LIABILITY SHEET AS ON 31
ST
MARCH
2010-11


As at 31-Mar-11 As at 31-Mar-10
ABSOLUTE
INCREASE/
DECREAES
CHANGE
IN %
CAPITAL AND
LIABILITIES

Capital 4,253,841 3,544,329
709,512 20.01823
Equity Share Warrants

4,009,158 -

Reserves and Surplus 142,209,460 111,428,076
30,781,384 27.62444
Employees Stock Options
(Grants) Outstanding
54,870 -

Deposits 1,428,115,800 1,007,685,910
420,429,890 41.72232
Borrowings 26,858,374 45,949,235
-19,090,861 -41.5477
Other Liabilities and
Provisions
227,206,229 163,158,482
64,047,747 39.25493

1,832,707,732 1,331,766,032
500,941,700 37.61484
ASSETS

Cash and Balances with
Reserve Bank of India
135,272,112 125,531,766
9,740,346 7.759268
Balances with Banks and
Money at Call and Short
notice
39,794,055 22,251,622
17,542,433 78.83665
Investments 588,175,488 493,935,382
94,240,106 19.07944
Advances 988,830,473 634,268,934
354,561,539 55.90082
Fixed Assets 17,067,290 11,750,917
5,316,373 45.2422
Other Assets 63,568,314 44,027,411
19,540,903 44.38349

1,832,707,732 1,331,766,032
500,941,700 37.61484
Contingent Liabilities 4,059,816,885 5,930,080,864
-1,870,263,979 -31.5386
Bills for Collection 85,522,390 69,207,148
16,315,242 23.5745


Interpretation:
The total current liabilities for the year are Rs.64047747 is less than the total
assets for the year are Rs.1331766032. Therefore the assets are more than the
liabilities. So there is a positive gap of Rs. 500941700 i.e 37.61%










-3,000,000,000
-2,000,000,000
-1,000,000,000
0
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
COMPARATIVE ASSET LIABILITY SHEET AS ON 31
ST
MARCH
2009-2010


As at 31-Mar-
10
As at 31-
Mar-09
ABSOLUTE
INCREASE/
DECREAES
CHANGE
IN %
CAPITAL AND
LIABILITIES

Capital 354,43 319,39 3504 10.970913
Reserves and
Surplus
11,142,80 6,113,76 502904 82.257727
Deposits 100,768,60 68,297,94 3247066 47.542664
Borrowings 4,478,86 2,815,39 166347 59.084887
Other Liabilities
and Provisions
16,431,91 13,689,13 274278 20.036189

133,176,60 91,235,61 4194099 45.969978
ASSETS

Cash and Balances
with Reserve Bank
of India
12,553,18 5,075,25 747793 147.34112
Balances with
Banks and Money
at Call and Short
notice
2,225,16 3,971,40 -174624 -43.970388
Investments 49,393,54 30,564,80 1882874 61.602693
Advances 63,426,90 46,944,78 1648212 35.10959
Fixed Assets 1,175,13 966,67 20846 21.564753
Other Assets 4,402,69 3,712,71 68998 18.584269

133,176,60 91,235,61 4194099 45.969978
Contingent
Liabilities
593,008 328,148,24 -32221816 -98.192866
Bills for Collection 6,920,71 4,60683 231388 50.227163





Interpretation:
The total current liabilities for the year are Rs.1368913 is less than the total
assets for the year are Rs.9123561. Therefore the assets are more than the
liabilities. So there is a positive gap of Rs. 4194099 i.e 45.96%







-40000000
-30000000
-20000000
-10000000
0
10000000
20000000
30000000
40000000
FINDINGS
ALM technique is aimed to tackle the market risks. Its objective is to
stabilize and improve Net interest Income (NII).
Implementation of ALM as a Risk Management tool is done using
maturity profiles and GAP analysis.
ALM presents a disciplined decision making framework for s while at the
same time guarding the risk levels.
There has been a small reduction in Gross Sales and with the performance
of prefab Division the Gross Profit gap has narrowed and contributing to
the EBIT. The Gross Profit has increased considerably from 6584124 Cr in
Last year to 968547 Cr in year. The interest payment has increased by
6987Cr in the Current year and the Profit before Tax at 69857 when
compared to 5874568 cr in Last year.
Perform Division realization has increased by 8% even the Turnover has
come to 641.80 Cr from 400.09 Cr in last year.
The PAT is in an increasing trend from 2009-2010 because of increase in
sale prices and also decreases in the cost of manufacturing. In 2011 and
2012 even the cost of manufacturing has increased by 5% because of
higher sales volume PAT has increased considerably, which leads to
higher EPS, which is at 98.366 in 2011.
The company also increased considerably which investors in coming
period. The company has taken up a plant expansion program during the
year to increase the production activity and to meet the increase in the
demand



CONCLUSION

The purpose of ALM is not necessarily to eliminate or even minimize risk.
The level of risk will vary with the return requirement and entitys
objectives.
Financial objectives and risk tolerances are generally determined by senior
management of an entity and are reviewed from time to time.
All sources of risk are identified for all assets and liabilities. Risks are broken
down into their component pieces and the underlying causes of each
component are assessed.
Relationships of various risks to each other and/or to external factors are
also identified.
Risk exposure can be quantified 1) relative to changes in the component
pieces, 2) as a maximum expected loss for a given confidence interval in a
given set of scenarios, or 3) by the distribution of outcomes for a given set of
simulated scenarios for the component piece over time.
Regular measurement and monitoring of the risk exposure is required.
Operating within a dynamic environment, as the entitys risk tolerances and
financial objectives change, the existing ALM strategies may no longer be
appropriate.





Suggestions
They should strengthen its management information system (MIS) and
computer processing capabilities for accurate measurement of liquidity
and interest rate Risks in their Books.
In the short term the Net interest income or Net interest margins (NIM)
creates economic value of the which involves up gradation of existing
systems & Application software to attain better & improvised levels.
It is essential that remain alert to the events that effect its operating
environment & react accordingly in order to avoid any undesirable
risks.
Muthoot FINCORP requires efficient human and technological
infrastructure which will future lead to smooth integration of the risk
management process with effective business strategies.















BIBILIOGRAPHY
Title of the Books Author
Publications
1. Risk management Gustavson hoyt sout western,
Thomson learning(2001)
2. India financial system M.Y. Khan
Mcgraw Hill Edition
3. Management Research magazine P.M.Dileep Kumar

Web sites
www.muthoothfianancecorp.com
www.investoros.com
www.financeindia.com
www.google.com