Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

ABSTRACT
The project REVIEWING PUBLISHED CORPORATE ANNUAL REPORT OF
MUTHOOT FINANCE.
An Annual Report is a comprehensive report on a company's activities throughout the
preceding year. Annual reports are intended to give information about the company's
activities and financial performance. Most jurisdictions require companies to prepare and
disclose annual reports, and many require the annual report to be filed at the company's
registry.

The responsibility of Muthoot Finance is to conduct the audit in accordance with the
Standards on Auditing issued by the Institute of Chartered Accountants of India.

The first step of this project is to understand how company prepare all the essential report
whole year and then submit annual report. To take an in depth knowledge of Financial
Report, Accounting Policies, Annual Reports and different forms of reporting.

The second step of this project is to understand and review the Annual Report made by
company which notify the Financial Report, Accounting Policies and reports of all the
transaction took place in the whole year. The details provided in the report are of use to
investors and other interested person to understand the company's financial position and
future direction.

The final step of this project is to suggest measures to make this whole process more
effective, less time consuming and error proof.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

EXECUTIVE SUMMARY
Muthoot Finance was founded by M George Muthoot in 1939.Muthoot Finance to enter
capital market through IPO route - Economic Times. The company has been licensed by
Reserve Bank of India under Section 45 I (a) of the RBI Act, 1934 to function as a Nonbanking financial company (NBFC) without accepting public deposits and is specifically
exempted from the provisions of the Money Lenders Act in Karnataka and other states. The
company's gold loan business constitutes more than 99 percent of its total income.
Muthoot Finance 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, its 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.
Muthoot Finance Ltd. is an Indian financial corporation. It is known as the largest gold
financing company in the world. In addition to financing gold transactions, the company
offers foreign exchange services, money transfers, wealth management services, travel and
tourism services, and sells gold coins at Muthoot Finance Branches. The company's
headquarters are located in Kerala, India, and operates over 4,400 branches throughout the
country. Outside India, Muthoot Finance is established in the UK, US, and United Arab
Emirates. While the company falls under the brand umbrella of the Muthoot Group, its stocks
are listed on BSE and NSE. The target market of Muthoot Finance includes small
businesses, vendors, farmers, traders, SME business owners, and salaried individuals.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

OBJECTIVE OF STUDY
An annual

report is

comprehensive report on

a company's activities

and

financial

performance throughout the preceding year.

Thus the detailed study on Annual Report is being carried out with the following objectives:
1. To understand how to read, analyze, and create financial statements to get a full and
accurate understanding how much money there is, how much debt is owed, the
income coming in each month, and the expenses going out the door.
2. To know how well the company is doing. Is company earnings higher, lower or the
same as the year before? How are sales doing? These numbers should be presented
clearly in the financial section of the annual report.
3. To find out whether the company is making more money than it is spending. How
does the balance sheet look? Are assets higher or lower than the year before? Is debt
growing, shrinking, or about the same as the year before?
4. To get an idea of managements strategic plan for the coming year. How
will management build on the companys success? This plan is usually covered in the
beginning of the annual report frequently in the letter from the chairman of the
board.
5. To find out where the company has been, where it is now, and where its going.

LIMITATIONS OF THE STUDY

Despite of all the efforts to make the analysis more comprehensive and scientific, a study
of present kind is bound to have certain limitations. Attempts have been made to provide
more comprehensive conceptual analysis.
1. The study is only limited to the information published and available by the
company.
2. The study is limited to the financial area of Annual Report.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

SCOPE OF THE STUDY

The study is limited based on data published by the companys financial statements.
The data has been collected for the financial year 2013-14 and has been analysed using
pictorial diagrams like graph, bar and columns charts etc.
The data has been collected from secondary sources.

RESEARCH METHODOLOGY
In order to fulfil the objectives of the study the data can be collected from two sources of
data

Primary Data
Secondary Data

SOURCES OF DATA:
Primary Data
The primary data of the topic is collected by personal interaction with the officials of the
finance and accounting department .For this project secondary data was used for collecting
data.
Secondary data
For gathering secondary data various other sources were used, which are
1.
2.
3.
4.
5.
6.

Different accounting records of the company.

Magazines and journals
Annual Reports
Company website
Internet and web searching
Company databases

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

CONTENTS
SR.NO

PARTICULARS

PAGE NO.

CHAPTER - I

INTRODUCTION OF PUBLISHED CORPORATE

ANNUAL REPORT

1 - 12

CHAPTER II

MUTHOOT FINANCE LTD

13 - 14

Introduction of Muthoot Finance Ltd

CHAPTER - III

CHAPTER - IV

CHAPTER - V

Financial Statements of Muthoot Finance Ltd for

the year ended March, 2014

13

15 - 18

Balance Sheet

15

Profit and Loss Statement

16

Cash Flow Statement

17

DATA ANALYSIS AND INTERPRETATION

19 - 32

Management Discussion and Analysis

19

Notes to Accounts

27

Interpretation to Financial Statements

30

CONCLUSION

33

Project on Published Corporate Annual Report of Muthoot Finance Ltd

BIBLIOGROPHY

2013-14
34

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

CHAPTER - I

INTRODUCTION
Today reporting by companies has to assume a high level of importance. Formerly annual
reports used to be less revealing and reporting was not timely and we not catering to
requirement of various shareholder. More was concealed than what was revealed. But today
thanks to investor awareness global standards used the effective functioning of regulatory
bodies corporate reporting has become more revealing.

ESSENTIALS OF FINANCIAL REPORTS

1) Relevance
Means selecting the information most likely to aid users in their economic decisions.
2) Understandibility
which implies not only that the selected information must be intelligible but also that
the users can understand it.
3) Verifiability
which implies that the accounting results may be corn borated by independent
measurers using the same measurement methods.
4) Neutrality
which implies that the accounting information is directed towards the common needs
of users rather than the particulars needs of specific users.
5) Timeliness
which implies an early communication of information to avoid delays in economic
decision-making.
6) Comparability
which implies that differences should not be the result of different financial accounting
treatments.
7) Completeness
Which implies that all the information that reasonably fulfils the requirements of other
qualitative objectives should be reported.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

2013-14

DEVELOPMENTS OF FINANCIAL REPORTING OBJECTIVE

. These objectives may be summarized as follows:
1. The particular objectives of financial statements are to present fairly, and in
conformity with generally accepted accounting principles, financial position, results of
operations, and other changes in financial position.
2. To provide reliable information about economic resources and obligations a business
enterprise in order(i) Evaluate its strengths and weakness.
(ii) Show its financing and investment.
(iii) Evaluate its ability to meet its commitments and
(iv) Show its resources base for growth.
3. To provide reliable information about changes in net resources resulting from a
business enterprises profit- directed activities in order
(i) Show investors expected dividend return
(ii) Show operations ability to pay creditors and suppliers, provide jobs for employees
pay taxes, and generate funds for expansion.
(iii) Provide management with information for planning and control and
(iv) Show its long-term profitability.
4. To provide financial information useful for estimating the earning potential of the firm.
5. To serve users who have limited authority.
6. To provide other needed information about changes in economic resources and
obligations.
7. To disclose other information relevant to statement users needs.
8. To provide a statement of earnings for predicting future performance.
9. To provide information required for decision making
10. To educate public about the company`s mission and goals.

ANNUAL REPORT
2

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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There are different ways of corporate reporting of which the most important is the published
Annual Report sent to the shareholders. An annual report is a comprehensive report on
company's activities throughout the preceding year. Annual reports are intended to
give shareholders and other interested people information about the company's activities
and financial performance. Annual Report is a mandatory part of reporting. Most jurisdictions
require companies to prepare and disclose annual reports, and many require the annual
report to be filed at the company's registry.
IMPORTANCE OF ANNUAL REPORT
i.

It gives an opportunity to take a step back and look at the overall practical and
financial health of your business.

ii.

You can know how well the company is doing.

iii.

You can find out whether the company is making more money than it is spending

iv.

You can get an idea of management`s strategic plan for the coming year.
Annual Report is statutory financial statements include profit & loss and balance

sheet in vertical form. It is accompanied by various schedules and notes to the accounts.
Other information deemed relevant to stakeholders may be included, such as a report on
operations for manufacturing firms or corporate social responsibility reports for companies
with environmentally or socially sensitive operations. The details provided in the report are of
use to investors to understand the company's financial position and future direction. The
financial

statements

are

usually

compiled

in

compliance

with IFRS and/or

the

domestic GAAP, as well as domestic legislation.

The information largely reflects the financial effects of transactions and events that have
already happened. Financial reporting is expected to provide information about an
enterprises financial performance during a period and about how management of an
enterprise has discharged its stewardship responsibility to owners. Management is also
interested in the information contained in the financial information that helps it carry out its
planning, decision-making and control responsibilities. Management has the ability to
determine the form and content of such additional information order to meet its own needs.
Published financial statements are based on the information used by management about the
financial position, performance and changes in financial position of the enterprise.

CONTENTS OF ANNUAL REPORT

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

1. STATUTORY :
a. Profit & Loss A/c
b. Balance Sheet
c. Director`s Report
d. Auditor`s Report
e. Notes to Accounts
2. ACCOUNTING STANDARDS :
f. Disclosure of accounting policies (AS 1)
g. Cash flow statement (AS 3)
h. Consolidated financial statements (AS 21)
i. Segment reporting (AS 17)
j. Related party Disclosures (AS 18)
3. LISTING REQUIREMENTS :
k. Cash flow statement
l. Management Discussion and Analysis
m. Report on corporate Governance
4. EXTENDED REPORTING :
n. Chairman`s speech
o. Financial highlights
p. Ten year`s summary
q. Value Added statement
r. Shareholder`s Information
s. Segment Reporting
t. Human Resource Accounting
u. Inflation Adjusted Accounts
v. Social Reporting
w. Important Ratios
x. Economic Value Added
y. Shareholder`s reference
z. Risk Management

Annual Report and Accounts - Contents

Contents: non-audited information
Narrative items
Chairmens statement
Directors report
Operating and financial review
Review of operations
Statement of corporate governance
Auditors report
Statement of directors responsibilities for the financial statements

2013-14

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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Shareholder information
Non-narrative
Highlights
Historical summary
Shareholder analysis
Balance sheet
A balance sheet is a statement of the resources owned and controlled by a business at a
single point in time.
It gives a snapshot of assets, liabilities and capital at a point in time.
It provides information about the companys funds and how they are used in the business.
Profit and loss account
The Profit and Loss Account is a statement which shows total business revenue less
expenses.
The P&L account quantifies and explains the gains or losses of the company over the
period of time bounded by two balance sheets
It provides a summary of the years trading activities:
Revenue from sales (turnover)
Business costs
Profit or (loss)
How the profit was used.
Cash flow statement
This is a statement which shows the flow of cash into and out of the business.
It is not the same as a profit and loss account.
The cash flow statement only records movements of cash and, for example, does not
include credit sales or purchases until such time as cash actually flows.
This statement became mandatory because of some high profile business failures of the
1980s/90s - these were companies that, in terms of the P&L, were profitable but were short
of cash to pay their debts.
The cash flow statement should not be confused with a cash flow forecast. The former is
historical whereas the latter is a forecast about the future.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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Statement of total recognised gains and losses

The STRGL is a financial statement which attempts to highlight all shareholder gains and
losses and not just those from trading.
It is a summary of all the profits and losses made during the year.
It is necessary because not all gains and losses are shown on the P and L account.
Example: upward revaluation of a fixed asset is not classed as revenue from trading
operations and so it will not shown up on the P and L Account. It does show up as an
addition to revaluation reserves on the balance sheet.

Certification of the annual report

A companys annual report must be provided with a certification that it is a true copy of the
original document. Read more on the page Certification of annual reports, see the menu.

Notes to the accounts

Provides a more detailed analysis of some of the entries in the accounts
Disclosure of accounting policies used (e.g. depreciation) and any changes to these
policies.
An explanation for any deviation from accounting standards.
Sources of turnover from different geographical areas.
Details of fixed assets, investments, share capital, debentures and reserves.
Directors emoluments (how much the Directors earned)
Earnings per share.

Accounting policies
Companies must describe the accounting policies they use in preparing financial
statements.
Companies have a choice of accounting policies in many areas such as foreign currencies,
goodwill, pensions, sales and stocks.
As different accounting policies will result in different figures it is necessary to state the
policy that was used so that readers of the accounts can make an informed judgement about
performance.
It is also important to state the effect of any changes in accounting policies restating prior
year numbers where this is materially significant.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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Chairpersons statement
An overview of the trading year.
A personalise overview of the companys performance over the past year.
Usually covers strategy, financial performance and future prospects.
Directors Report
Its principal objective is to supplement the financial information with other information
consider necessary for a full appreciation of the companies activities. It includes:
A description of the principal activities of the company.
A fair review of the current and future prospects of the business.
Information on the sale, purchase or valuation of assets.
Recommended dividends.
Employee statistics.
Names of directors and their interests.
Details of political or charitable donations.
Operating and financial review
This is a statement in the annual report which provides a formalised, structured explanation
of financial performance.
The operating review covers items such as operating results, profit and dividend.
The financial review discusses items such as capital structure and treasury policy.
Operating and financial review
Operating review
New product development
Details of shareholders returns
Risks and uncertainties
Future investment
Sensitivity of financial results to specific accounting policies.
Financial review
Current cash position.
Sources of finding.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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Treasury policy.
Capital structure.
Confirmation of the business as a going concern.
Factors outside the balance sheet impacting on the value of the business.
Taxation.
Other features
Highlights
An at a glance summary of selected figures and ratios.
Historical summary
Five years of selected data from the balance sheet and profit and loss account
Tables and graphs to illustrate trend and comparison of turnover, profit, dividend and
earnings per share.
Shareholder analysis
Detailed analysis of the shareholders, for example by size of shareholding.
Auditors report
Auditors are independent accountants who are registered to carry out this work.
They also have to certify that the accounts are drawn up in accordance with the
requirements of the Companies Act.
Auditors must make a brief report to confirm that the accounts give a true and fair view of
the firms financial position.

Shareholder`s fund and policy holder`s fund

Shareholder`s fund are usually the shares in the company, any share issue premium,
retained profits and possibly other reserved that have been accumulated.
Policy holder`s fund represents customer deposit plus interest credited at current rates.
CAG Report
CAG Report shows all receipts and expenditure of the government of India and the state
government.

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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Report of board of directors to member

Board of directors issue a report quarterly, half yearly and annually giving details about the
companies, policies, programs and formulating strategies about the company to members
Annual general meeting
Gathering of the directors and stockholders of every incorporated firm required.
Management report
Management report is the statement made by management and it is used to compare the
actual results achieved with the budgeted forecast levels. This report helps the management
to see where they went wrong and they apply measures to improve it.
Segment reporting schedule
In an annual report the purpose of business segment reporting is to provide an accurate
picture of a public company`s performance to its shareholder`s. For upper management,
business segment reporting is used to evaluate each segment`s income, expenses, assets,
liabilities and so on in order to assess profitability and riskiness.

NOTES TO ACCOUNTS
Financial Statements are prepared as per historical cost convention on accrual basis of
accounting. These statements comply with the companies Act 1956 and the Accounting
Standards issued by the ICAI. The significant Accounting Policies are about the following:
1.
2.
3.
4.

Fixed assets depreciation and amortisation

Investments
Inventories
Provision for doubtful debts/advances

Project on Published Corporate Annual Report of Muthoot Finance Ltd

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5. Foreign currency transactions

6. Revenue Recognition
7. Retirement benefits
8. R & D
9. Excise / Custom duty
10. Income tax
11. Borrowing cost
12. Provision for current and Deferred Tax
13. Premium on Redemption of Debentures.
NOTES TO ACCOUNTS
Annual Report of every company must contain notes to accounts due to the following
1.
2.
3.
4.

Financial statements are prepared in vertical format in abridged form.

Notes to Accounts give the contents of every item in the financial statements.
Notes to Accounts explain the policies of the company.
Notes to Accounts bring out the effect of change in method of accounting on profits of

the company.
5. Details of the changes in policies are disclosed through notes.
6. The reader can interpret the financial statements with the help of Notes to Accounts.
7. Notes to Accounts explain about the compliance of SEBI Guidelines, RBI Guidelines,
Accounting Standards etc.
8. Notes to Accounts throw light on the methods/procedure of accounting followed by
the organisation.

Significant Accounting Policies in Financial Statements

Significant Accounting Policies are specific accounting principles and methods a
company employs and considers to be the most appropriate to use in current circumstances
in order to fairly present its financial statements. The disclosure of Accounting Policies helps
users of financial statements (e.g., investors, creditors, vendors) to understand how
particular accounting principles were used in preparing the companys financial statements.
Description of significant accounting policies also helps in comparing financial statements of
different companies.
Disclosure of significant accounting policies should be done in the following situations:

A selection of existing acceptable alternatives.

Principles and methods that are specific in a particular industry in which the company
operates.

Unusual or innovative application of GAAP.

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

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Some areas for which significant accounting policies can be disclosed in financial
statements are presented below:

Basis of consolidation
Accounts receivables and determination of allowance for bad debts
Advertising costs
Cash and cash equivalents
Changes in accounting policies
Deferred income taxes
Derivatives and hedging activities
Fair value elections, methods, assumptions, inputs used
Fiscal year (52-53 week year)
Foreign currency translation
Goodwill
Impairment of long-lived assets, goodwill, other intangibles, investments, etc.
Intangible assets
Interest capitalization
Internal-use software
Inventories and their pricing (FIFO, LIFO, Weighted-average, etc.)
Nature of operations
Operating cycle
Pension and other postretirement or postemployment plans
Property and equipment and related depreciation and amortization
Reclassifications
Research and development costs and their basis of amortization
Revenue recognition
Stock-based compensation
Shipping and handling costs
Start-up costs
Use of estimates
Warranties

Companies normally present significant accounting policies in a separate note to financial

statements or in a separate summary of significant accounting policies preceding the notes
to financial statements.
RATIO TO ANALYSE FINANCIAL STATEMENT

Annual reports contain information about financial highlights and the key indicators. The key
ratios are given for the last 10 years. These ratios help to interpret financial position of the
company. The analyst should draw conclusion about the following from the reported ratios:
1. Liquidity Position

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Project on Published Corporate Annual Report of Muthoot Finance Ltd

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With the help of ratio conclusions can be drawn about liquidity position of a company.
Liquidity is the ability of a company to meet its current obligations when they become
due. A firm is said to have food liquidity position when it has sufficient liquid assets to
meet the current obligations.
2. Long term Solvency
Ratio analysis is useful for assessing the long term financial position of a company.
The position can judged from capital structure ratio, debt equity ratio and proprietary
ratio.
3. Operating efficiency
Operating efficiency of the management is judged from operating ratio, net operating
profit ratio, inventory turnover, debt collection etc.
4. Overall Profitability
It is the ability of the company to generate adequate income so that the shareholders
can be rewarded adequately. This is judged from return on investment, return on
equity capital, E.P.S etc.
5. Utilisation of resources
The management efficiency in utilization of resources can be judged from assets
turnover ratios, return on investment etc.

12

CHAPTER - II

MUTHOOT FINANCE LIMITED

Muthoot Finance was founded by M George Muthoot in 1939.Muthoot Finance to
enter capital market through IPO route - Economic Times. The company has been licensed
by Reserve Bank of India under Section 45 I (a) of the RBI Act, 1934 to function as a Nonbanking financial company (NBFC) without accepting public deposits and is specifically
exempted from the provisions of the Money Lenders Act in Karnataka and other states. The
company's gold loan business constitutes more than 99 percent of its total income. Its retail
loan assets stand at Rs. 23,763 Crs. the total number of shares of Muthoot Finance held by
Individuals/Hindu Undivided Family stood at 80.12 percent and the public shareholdings
from Mutual Funds/UTI totalled 3.52 percent.
Muthoot finance is a flagship company of the Muthoot Group based in

Southern

India.

Company was formed with a vision of creating an organization capable of serving the
versatile need of the growing Indian financial market

the focus of the company is on

creating liquidity with an asset class, namely gold that has the largest consumer market.
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. They have
deployed 25000 people in over 4400 branches spread over 21 states and 4 union Territories.
Muthoot finance is a major market player dedicated to make a positive impact on countless
people ranging from farmers to salaried employees seeking financial aid. The target market
of Muthoot Finance includes small businesses, vendors, farmers, traders, SME business
owners, and salaried individuals.
Muthoot finance India Ltd has 4,270 branches across 26 states and Union Territories,
75% Promoter shareholding in the company
5 lakhs + Debenture holders in the company
5 Millions + Customers
75 years unblemished track records

PRODUCT AND SERVICES OF THE MUTHOOT FINANCE

13

1. GOLD LOAN
India`s largest gold loan service provider, safeguard the deposit of gold is primary
concern. Gold loan range starts from Rs.1500 to Rs. 1 Crore.
2. GOLD COIN
Muthoot finance help to invest in the most powerful asset, which is gold it is also a
leading Silver and Gold Coins provider in India.
3. M POWER CARD
Ticket to heavy discounts, rebates and interesting services that add value to
members. M Power Card is a CRM Service provided by Muthoot Finance.
4. MONEY TRANSFER
Mothoot Money Transfer makes it possible to Receive and Send money within a blink
of an eye.
5. FOREIGN TRANSFER
Muthoot Exchange brings you hassle-free currency exchange services that are
provided at competitive rates.
6. TRAVELSMART
Muthoot finance provides flexible and customized travel insurance and foreign
exchange alongside travel packages and tour arrangements.
7. WEALTH MANAGEMENT SERVICE
Wealth Management is classified into 4 step process comprising risk evaluation,
client evaluation, value analysis and consultancy.
8. ATM
Muthoot finance aims to expand the number of ATMs reach to Tier III to Tier VI cities
as well, as part of financial inclusion.
In 2013 it obtains RBI License to start operating 9,000 White Label ATMs.

CHAPTER III
FINANCIAL STATEMENTS OF MUTHOOT FINANCE LTD FOR THE
YEAR ENDED MARCH 2014
BALANCE SHEET OF FOR THE YIEAR ENDED MARCH 2014

14

PARTICULARS

31st March, 2014

31st March, 2013

EQUITY AND LIABILITIES

Shareholders funds
Share capital

3,717,127,680.00

3,717,127,680.00

38,928,634,085.04

33,638,524,414.26

69,046,032,561.10

79,529,418,712.87

8,975,080,634.76

5,633,839,140.60

18,733,086.00

2,410,000.00

Short-term borrowings

60,642,866,946.00

94,802,406,416.23

Trade Payables & Other current liabilities

72,431,871,016.08

73,155,919,995.26

2,178,393,743.91

3,683,008,186.58

255,938,739,752.89

294,162,654,545.80

3,119,747,528.67

2,888,081,210.06

6,065,822.34

5,696,085.11

83,785,469.00

95,963,836.25

60,267,280.00

40,431,863.00

46,749,940.00

75,049,940.00

210,470,735.90

195,441,491.90

1,019,451,594.24

1,045,225,440.06

307,000,000.00

750,000,000.00

11,639,680,421.27

11,481,770,359.45

20,489,267,554.30

13,419,987,682.79

218,944,896,078.16

264,131,088,154.70

11,357,329.01

33,918,482.48

255,938,739,752.89

294,162,654,545.80

Reserves and surplus

Non-current liabilities
Long-term borrowings
Other Long-term liabilities
Long-term provisions

Current liabilities

Short-term provisions
TOTAL

ASSETS
Non-current assets
Fixed assets

Tangible Assets
Intangible Assets
Capital Work-in-progress
Intangible Assets under development
Non-current investments
Deferred tax assets (net)
Long-term loans and advances

Current Assets
Current investments
Trade receivables
Cash and Bank Balances
TOTAL

STATEMENT OF PROFIT AND LOSS ACCOUNT OF MUTHOOT

FINANCE FOR THE YIEAR ENDED MARCH 2014
PARTICULARS
Revenue from

49,278,820,053.01
53,588,984,621.56
31st March,
2014
31st March,
2013
195,544,949.75
282,381,919.53

Operations
Total Revenue

15

49,474,365,002.7

53,871,366,5

41.09

Expenses:

5,917,121,758.87

Employee benefits expense

5,452,749,569.

26,259,879,576.76

71
28,194,442,89

4,257,105,053.85

1.99
3,567,826,839.

Directors Remuneration

192,000,000.00

56
192,000,000.0

Depreciation and amortization expense

474,615,435.73

0
454,430,452.4

Provisions and Write Offs

438,086,684.35

6
895,462,587.0

37,538,808,509.5

0
38,756,912,3

6
11,935,556,493.20

40.72
15,114,454,20

Finance costs
Other expenses

Total Expenses
Profit Before Tax

0.37

Tax Expense:

4,123,961,486.00

5,171,097,057.

(15,029,244.00)

00
(191,545,228.0

25,933,715.42

0)
92,507,141.84

7,800,690,535.78

10,042,395,2

Current tax
Deferred tax
Taxes relating to Previous Years
Profit for the year

29.53
Earningsperequityshareof`10/-each

20.99

Basic & Diluted

27.02

CASH FLOW STATEMENT FOR THE YIEAR ENDED MARCH 2014

PARTICULARS
A

31st March, 2014

Cash
FlowBefore
From Operating
Net Profit
Taxation

31st March, 2013

11,935,556,493.20

15,114,454,200.3
7

Adjustments for:
Add: Provision for Non- Performing Assets and
Standard
assets
Add: Finance
Cost
Add: Loss on Sale of Fixed Assets

16

213,948,607.00

765,190,034.00

26,259,879,576.7

28,194,442,891.9

6
80,760.00

9
213,367.00

Add: Depreciation and amortization

474,615,435.73

454,430,452.46

Add: Provision for Gratuity

18,733,086.00

2,410,000.00

Add :Expenses on ESOP

98,731,243.00

Less: Interest received on Bank Deposits

(70,993,542.80)

(195,639,653.95

Less: Income from Investments

(85,776,381.95)

(85,698,393.58))

Less: Profit on sale of Investments

(37,950,000.00)

Operating profit before working capital changes

38,806,825,276.94

44,249,802,898.29

45,211,965,922.36

(50,477,390,792.7

(157,910,061.82)

2)
(4,141,538,546.0

Adjustments for:
(Increase) / Decrease in Loans and Advances
(Increase) / Decrease in Trade receivables
(Increase) / Decrease in other receivables
Increase / (Decrease) in Current liabilities

153,937,363.67

-23,712,913.76

Increase / (Decrease) in Other Liabilities

(1,852,892.26)

5,486,267.30

84,012,965,608.89

(10,386,831,281.3

(22,391,757,790.41

8)
(23,828,995,205.2

Direct tax paid

(4,359,281,173.09)

6)

Net cash from operating activities

57,261,926,645.39)

(5,308,549,132.10)
(39,524,375,618.74

Cash generated from operations

Finance cost paid

9)
521,805.60

Cash Flow From Investing Activities

Purchase of Fixed Assets
Sale of Fixed Assets
(Increase) / Decrease in Capital Work in

(711,014,501.57)

(724,067,399.14)

4,282,250.00

2,541,458.00

(7,657,049.75)

(81,030,468.00)

443,000,000.00

150,000,000.00

Progress
Sale of Bonds

66,250,000.00

Sale of Investment in Shares

81,966,908.60

252,089,352.15

Interest

97,364,169.62

66,080,242.90

(25,808,223.10)

(334,386,814.09)

(6,154,952,000.00

33,940,758,000.0

)
2,315,016,877.30

0
1,480,611,281.0

Income
Net Cash from Investing Activities
C

---

Cash Flow From Financing Activities

Net Proceeds from Issue of Debentures
Increase / (Decrease) in Loan from Directors /
Relatives of Directors

Increase / (Decrease) in Borrowings from Bank

/Financial Institutions
Increase / (Decrease) in Inter Corporate Loan

(43,330,189,698.23

9,043,583,304.1

(52,220,000.00)

(78,230,000.00
)

17

Increase / (Decrease) in Subordinated debt

3,245,842,000.00

8,199,876,000.0

Increase / (Decrease) in Commercial Papers

(2,073,562,100.00

0
(5,530,622,300.0

Dividend paid (including Dividend distribution

(4,116,773,629.85))

0)
(1,727,611,944.00

(899,041,471.40)

2,620,588,164.5)

tax)
(Increase) / Decrease in bank deposits held for
greater than 3 months

Net Cash from financing Activities

D

Net Increase In Cash And Cash Equivalents

(51,065,880,022.18

47,948,952,505.6

)
6,170,238,400.11

6
8,090,190,072.8
3

(A+B+C)
Cash And Cash Equivalent at the Beginning of

13,401,835,731.7

5,311,645,658.9

the Year
Cash And Cash Equivalent at the End of the

9
19,572,074,131.9

6
13,401,835,731.7

16,872,853,791.7

10,845,228,865.2

9
350,000,000.00

4
720,000,009.00

Cash on Hand

2,347,061,235.96

1,836,163,309.5

Unpaid Dividend

2,159,104.15
19,572,074,131.9

5
443,548.00
13,401,835,731.7

Year
Components of Cash and Cash Equivalents
at the end of the Year
Deposit with Banks

Total

CHAPTER IV

DATA ANALYSIS AND INTERPRETATIONS

MANAGEMENT DISCUSSION AND ANALYSIS

GDP at factor cost

8
7
6
5
4
3
2
1
0

6.7

2011-12

4.5

4.7

2012-13

2013-14

GDP GROWTH

18

The Indian Economy witnessed yet another year of sub 5 % GDP growth. FY 13 saw the
worst GDP growth rate in the decade. The last time the economic growth rate had pierced
the 5% mark. It is widely believed that economic growth will accelerate in 2014-15 as the
reform process continues and starts yielding results. The pick-up will depend on resolution
of several existing issues mainly implementation of stalled projects, ease of land acquisition,
approvals from state governments, mine sector reforms, capital infusion to banks etc. There
could be a minor improvement in growth rate in the second half of the current fiscal due to
improvement in manufacturing and investments to around 5% and depending on the level of
reforms, the growth may rise to 6% over medium term.
Role of NBFCs
NBFCs being financial intermediaries are engaged in the activity of bringing the saving and
the investing community together. In this role they are perceived to be playing a
complimentary role to banks rather than competitors. NBFCs have carved niche business
areas for them within the financial
sector space and are also popular for providing customised products. In short, NBFCs bring
the much needed diversity to the financial sector thus diversifying the risks, increasing
liquidity in the markets thereby promoting financial stability and bringing efficiency to the
financial sector.
Regulations
Reserve Bank Of India has over the last 50 years streamlined the NBFC regulations,
addressed the risks posed by them to financial stability, depositors and customers interests,
regulatory arbitrage and helped the sector grow in a healthy and efficient manner. Some of
the regulatory measures
include identifying systemically important non-deposit taking NBFCs as those with asset size
of Rs.100 Crores and above and bringing them under stricter prudential norms (CRAR and
exposure norms), issuing guidelines on Fair Practices Code, aligning the guidelines on
restructuring and
securitisation with that of banks, permitting NBFCs-ND-SI to issue perpetual debt
instruments etc. It is an acknowledged fact that NBFCs in India are playing a crucial role in
meeting the Financial Inclusion objectives and needs of our country.
Gold Loan Sector
The countrys Organised Gold Loan market has witnessed a significant expansion in the last
one decade. The large domestic household gold holding of the country enabled the creation
of this market. The magnitude of this holding could be more than 18000 tonnes. Most of the

19

gold is held by people in rural areas and in many cases this is the only asset they have in
their possession. While richer sections diversify their portfolio according to risk-return
equation, the poor rely more on gold as well as silver commodities. The jewellery bought in
times of prosperity has been sold for cash in periods of distress or need.

Due to the

increased holding of gold as an asset among large section of people as also the nontransparent practices of lending against gold in the

Unorganised sector, entities like

Muthoot Finance started providing loans against the collateral of used gold jewellery many
years back and over a period transformed itself as NBFCs with core focus on gold loans.
Factors influencing expansion of gold loan sector
The gold loan industry is driven by multiple factors. Since the loan is granted against gold
jewellery, the quantum of gold jewellery available with the customers is of utmost
importance. The needs of the borrower coinciding with various purposes like cropping
season, business season, academic year, festivals, Medical purposes etc, are critical in
determining the demand for gold loans. Further, easy
availability of loans on flexible terms and changing attitude of customers to avail loans and
relative constriction by banks for giving personal loans enabled the popularisation of the
product. To tap the opportunity, aggressive network expansion by NBFCs on a pan India
basis, enabled the product to reach the masses and thereby widening the customer base.
Further, aggressive marketing campaigns by the NBFCs increased awareness among the
people and renunciation of stigma
attached to pledging of gold jewellery. NBFCs, since having core focus, invested in
infrastructure thereby building service quality. Customers found comfort and confidence in
their transparent practices and started shifting their loyalties from the unorganised sector to
the organised sector.
LEVEL PLAYING FIELD
The regulatory Loan to Value cap of 60% on gold price for NBFCs denied the sector a level
playing field with banks. The increased focus of banks on retail lending consequent to lack
of adequate opportunities for safe corporate lending created disequilibrium in gold loan
business. In January
2014, RBI relaxed the LTV norms for NBFCs by increasing the cap to 75% from 60%.
Subsequently, RBI made the LTV cap applicable for banks also. This measure will pave way
for a stability in the business of gold loans by NBFCs going forward and healthy
development of the sector.

20

 OUTLOOK
Credit extended by the gold loan NBFCs witnessed a CAGR of 86.7% during the period
March 2009 to March 2013. In absolute terms, NBFC gold loans increased from just Rs.39
billion as on 31st March, 2009 to Rs.475 billion as on 31 st March, 2013. Monetising idle gold
is crucial for creation of productive resources for India. NBFCs can continue to play a major
role in this process.

NBFCs-MONETISING IDLE GOLD

Core focus - The primary focus of the gold loan NBFCs is to provide gold loans.
Branch network - Branches play a significant role in building an institutions brand image. A
wide network of branches enables NBFCs to be closer to the customer
Faster turnaround time - Superior service creates loyalty and deeper customer
relationships. achieved without any compromise on documentation discipline and KYC
compliance requirements.
Transparent and Standard Operating Practices - NBFCs offer a transparent transaction
capturing all the terms clearly in the loan document and operate with standard operating
procedures
Flexible Repayment Option - Customers get a trouble free loan period where he is not
troubled for any payment of equated monthly instalment rather would be allowed to make
payment of interest and principal on closure of the loan.
Resources availability - NBFCs have access to organised credit and hence do not face
any constraint.
Value to the Customer - Customers stay with a service provider if they pay a price they
deem fair for quality of the products they receive.
Low-cost structure - The Company has built network with a minimum investment
corresponding to the potential of business in which it is going to operate.
RISK MANAGEMENT
The objective of risk management systems is to measure and monitor the various risks the
Company is subject to and to implement policies and procedures to address these. The
Company continues to improve its operating processes and risk management systems that
will further enhance its ability to manage these risks.
INTERNAL SYSTEMS AND THEIR ADEQUACY
Muthoot Finance has an adequate internal control system in place to safeguard assets and
protect against losses from any unauthorised use or disposition. The Companys internal

21

controls are supplemented by an extensive programme of internal audits, review by the

management, and documented policies, guidelines and procedures.
CAUTIONARY STATEMENTS
Statements in this Management Discussion and Analysis describing the Companys
objectives, projections, estimates and expectations may be forward looking statements
within the meaning of applicable laws and regulations. This report should be read in
conjunction with the financial statements included herein and the notes thereto.

Financial Performance of Muthoot Finance for the year ended 2014

Average Gold Loan Outstanding per Branch GOLD LOAN ASSETS

30000

7
6.63

6
5 5.75
4

25000

6.36

24417

20000
5.06

15000
10000

5000

1
0
FY 10-11 FY 11-12 FY 12-13 FY 13-14

22

15728 15728

26000

PROFIT AFTER TAX

1200

6000

1000
800

892

5000

1004
780

600
400

REVENUE
4549

4947

3000
2000

494

5387

4000

200

1000

2316

Capital Adequacy Ratio

30
25

24.69

20
15

15.82

18.29

19.62

10
5
0
FY 10-11 FY 11-12 FY 12-13 FY 13-14

From the Charts we can understand that

23

Gold Loan Assets is increasing every year. But as compared to previous year it was slightly
increased.
Average Gold Loan outstanding per branch decreased in the year 2013-14 as compared to
previous year which is good for company
Revenue and Profit After Tax slightly decreased in the FY 2013-14 as compared to PY 201213
Capital Adequacy Ratio Increased in the FY 2013-14 as compared to PY 2012-13

STRIKING A BALANCE OF MUTHOOT FINANCE

During FY 2013-14, the gold loan industry was severely impacted by a set of three distinct
factors. First, it was regulatory action, designed to infuse greater credibility and governance
in the sector in the long run. Second, it was the fall in the price of gold, unleashing a fresh
wave of speculations on the business model, leading to an uncertain environment. Third, it
was the overall downturn in the core economic sectors, which led to Regulatory action first
reduced the maximum loan-to-value allowed on gold loans by NBFCs to 60% of gold price,
Subsequently, however, this cap was revised upwards to 75% for NBFCs and
simultaneously made this cap applicable for banks, which paved the way for a level playing
field. The fall in gold prices triggered a wave of speculation on business model leading to
suspicion in the minds of various stakeholders inspite of clarifications on the risk
management practices of the company. Therefore, striking a balance between adhering
to evolving regulation and changing as well as growing customer expectations
remains a key focus area.
Striking a balance between Regulatory landscape and commitments

The regulatory clarity came following a period of uncertainty, which engulfed the gold
loan industry, with intermediate rules making banks capable of lending at a higher
LTV than NBFCs. In addition, the disbursement of loans of Rs.1 lakh and above
compulsorily by cheque also affected the interest of customers as a normal cheque
collection usually takes about three days even now. Though its easier to obtain PAN
card now-a-days, insistence of PAN card for loans of Rs.5 lakhs and above was

another regulatory norm, which a gold loan customer was required to comply with.
As the largest industry player in the gold loan business, They focused on gold loan
financing with widening reach, customised products and services, and above all

24

deepening relationships and trust of a growing fraternity of customers, investors and

other stakeholders. They stand by their customers when it matters most, bringing
millions of people within the ambit of organised financing.
Striking a balance between raising capital and cost of capital

Muthoot finance have relied on the proceeds of non-convertible debentures placed

through their branches under private placement mode subscribed primarily by retail
investors with an average ticket size of around Rs.1.5 lakhs. This constituted about
49% of total funding source at the beginning of FY 2013-14. They believe that
mobilisation through this mode was possible on account of for industry leadership,
goodwill, trust, reputation, track record, performance, stability in our business and

strong quality asset portfolio.

To tame spiralling inflation, RBI consistently increased the benchmark policy repo rate
from 7.25% to 8% by the end of FY 2013-14 and correspondingly the bank rate from
8.25% to 9.0%. This resulted in the banking sector increasing the base rate of lending
to a certain extent. In addition, the regulatory stress and baseless speculation about
the business model kept the expectations of lenders on lending rates high. The
situation has eased a little following the RBIs relaxation of LTV cap from 60% to 75%

Striking a balance between Mitigating Risk and Maximising Return.

They provide one of the fastest loan approval and collateral appraisal processes
backed by strong systems and policies that give us a two-fold advantage. One, it
strengthens the trust of the customers. Second, their strong systems and processes
help them to keep the bad debts write-off levels at the minimum. In addition, the gold
jewellery, which acts as a collateral for loans, can be easily liquidated at auctions,

ensuring maximum realisation of loan amounts in case of any defaults

While their assets under management declined considerably during FY 2013-14, they
remained profitable, despite hardships. Their profitability during tough times
demonstrates the strength of business model consequent to which the capital
leverage declined to 4.53 times from 6.52 times in previous year. As reserves
strengthened to Rs.3, 893 Crores, They decided to give back a higher amount to
stakeholders, resulting in a higher dividend payout of 29% as against 17% last year.
Such a measure will reinforce stakeholder trust in their operations and the long term
commitment to create value.

Striking a balance between Diverse Offerings and Fostering Relationships

25

During FY 2013-14, they disbursed Rs.4596 Crores comprising 21 lakhs transactions.

They have also forayed into the ATM network with the launch of White Label ATM,
empowering rural customers with ATM services. The ATM launch reiterates to
commitment towards making finance easily available in the rural hinterland. We
developed an in-house Core Banking Solution, It enabled to provide anytime &

anywhere services to customers and enhanced convenience.

At Muthoot, they have been committed to continuously strengthen brand and enrich
products and services. Being consumer focused, they strive to reach and connect
with consumers through several brand initiatives. Apart from the conventional outdoor
branding routes (buses, bus depots, local trains, boats in high-traffic areas), we have
also aggressively scaled up contemporary branding measures (principal sponsors of
Delhi. Daredevils in 2011, 2012 and 2013 and online media, among others). These
measures have not only widened their reach, but also strengthened relationships with
customers.

Striking a balance between Employee Engagement and Employee Motivation

Muthoot empower and engage 25,012-people strong team to achieve the

organisational goals and, in turn, drive their career progression. They routinely
conduct several sales orientation and marketing programmes for their people, so that
they can go to the market and educate potential customers about the benefits of gold

financing.
During the year under review, they announced our maiden Employee Stock Option
Plan (ESOP) for all our permanent employees. The options were granted to
employees through three stock option schemes. The management decided to reward
employees for their loyalty and performance and the initiative helped enhance their
sense of ownership. They continue to train their national team at higher levels with
their established Regional Learning Centres across India with 7 days of average
training per employee. They focus on developing the qualities, such as soft-skills,
leadership, personality development, marketing and customer service, among others.
These factors enhance the service quotient of our team, motivating and inspiring
people to lead from the front.

Striking a balance between Commerce and Conscience

Muthoot have created sustainable value by driving financial inclusion for a significant
consumer base. They have the relevant infrastructure and the technological expertise
to process large number of transactions on a daily basis across pan-India branch

26

network. In addition, they are expanding and deepening their reach to Indias remote

corners with the help of a motivated workforce.

They are committed to empower the ambitions of a large cross-section of people,
who in turn help shape the nations future course as citizens. As a conscientious
corporate, they partner with several organisations to contribute in areas like
education, health, environment and safety. They are stepping up investments in the
social sector to help improve the quality of life

NOTES TO ACCOUNTS FOR THE YEAR ENDED 31st March 2014

(Amounts in the financial statements are stated in Rupees, except for share data and as otherwise
stated.)

1. Accounting Concepts
The financial statements are prepared on historical cost convention complying with the
relevant provisions of the Companies Act, 1956 and the Accounting Standards issued by the
Institute of Chartered Accountants of India, as applicable. The Company follows prudential
norms for income recognition; asset classification and provisioning as prescribed by
Reserve Bank of India vide Non-Banking Financial Companies Prudential Norms (Reserve
Bank) Directions, 2007. The estimates and assumptions used in these financial statements
are based upon the management evaluation of the relevant facts and circumstances as of
the date of the financial statements. Management believes that these estimates and
assumptions used are prudent and reasonable.
2. Revenue Recognition
Revenues are recognised and expenses are accounted on accrual basis with necessary
provisions for all known liabilities and losses. Revenue is recognised to the extent it is
realisable wherever there is uncertainty in the ultimate collection. Income from NonPerforming Assets is recognised only when it is realised. Income and expense under
bilateral assignment of receivables accrue over the life of the related receivables assigned.
Interest income and expenses on bilateral assignment of receivables are accounted on
gross basis. Interest income on deposits is recognised on time proportionate basis.
3. Fixed Assets
Fixed assets are stated at historical cost less accumulated depreciation. Cost comprises the
purchase price and any attributable cost of bringing the asset to its working condition for its
intended use. Depreciation is charged at the rates specified in Schedule XIV of the
Companies Act, 1956.
4. Intangible Assets

27

Intangible Assets are amortised over their expected useful life. It is stated at cost, net of
amortisation. Computer Software is amortised over a period of five years on straight line
method.
5. Cash And Cash Equivalents
Cash and cash equivalents comprise of cash at bank, cash in hand, bank deposits having a
maturity of less than 3 months and unpaid dividend.
6. Provisions, Contingent Liabilities & Contingent Assets
Provisions are recognised only when the Company has present, legal, or constructive
obligations as a result of past events, for which it is probable that an outflow of economic
benefit will be required to settle the transaction and a reliable estimate can be made for the
amount of the obligation.Contingent liability is disclosed for (i) possible obligations which will
be confirmed only by future events not wholly within the control of the Company or (ii)
present obligations arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. Contingent assets are not recognised in the financial
statements since this may result in the recognition of income that may never be realised.
7. General Reserve
Appropriate transfer to General Reserves in accordance with Companies (Transfer of Profits
to Reserves) Rules, 1975, has been made in the financial statements.
8. Debenture Redemption Reserve
During the year, the company has transferred an amount of Rs.6,637,035,559.00
(Previous Year Rs. 967,249,498.00) to the Debenture Redemption Reserve. No
appropriation was made from this Reserve during the year.
9. Statutory Reserve
Statutory Reserve represents the Reserve Fund created under Section 45 IC of the Reserve
Bank of India Act, 1934. An amount of Rs.1,560,138,107.00 representing 20% of Net Profit
is transferred to the Fund for the year ( Previous Year: Rs.2,008,479,046.00).
10. Secured Redeemable Non-Convertible Debentures
The Company had privately placed Secured Redeemable Non-Convertible Debentures for a
maturity period of 60-120 months with an outstanding amount of Rs.81,579,609,000.00
(Previous Year: Rs.94,596,214,000.00)
11. Secured Non Convertible Debentures Public Issue
The outstanding amount of Secured Rated Non-Convertible Listed Debentures raised
through Public Issue stood at Rs.23,734,590,000.00 (Previous Year: Rs.16,872,937,000.00)

28

12. Subordinated Debt

Subordinated Debt is subordinated to the claims of other creditors and qualifies as Tier II
capital under the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies
Prudential Norms (Reserve Bank) Directions, 2007. The outstanding amount of privately
placed

subordinated

debt

stood

at

Rs.25,366,628,000.00

(Previous

year:

Rs.23,000,972,000.00)
13. Long Term Loans and Advances
Security Deposit includes Rs.1,822,500.00 (Previous Year: Rs.1,822,500.00) being rent
deposit due from promoter Directors and Rs.1,470,000.00 (Previous Year: Rs.1,470,000.00)
being rent deposits due from firms in which promoter Directors are partners
14. Current Investments (Valued at lower of cost and fair value) Quoted
Current investments refers to investment in 307 bonds of 10.05% Unsecured, Redeemable,
Non-Convertible, Upper Tier II Subordinated Bonds issued by Yes Bank Limited
Rs.307,000,000.00 listed in BSE (Previous Year: Rs.750,000,000.00)
15. Employee Benefits
Defined Contribution Plan - During the year, the Company has recognised the contribution
to Provident Fund, in the Statement of Profit and Loss.
Defined Benefit Plan - Gratuity Plan - The deficit in funding of gratuity Rs.18,733,086.00
has been accounted as Long term provisions.Estimated employer contribution for 2014-15 Rs.90,000,000.00
16. Dividends proposed to be distributed to equity shareholders
The Board has recommended a final dividend for the year 2013-14 of Re.1/- (10%) per
equity share of Rs.10/- each , subject to the approval of shareholders in the ensuing Annual
General Meeting. The Company has during the year paid interim dividends aggregating to
Rs.5/- (50%) per equity share of Rs.10/- each (Previous Year: Nil). The total dividend for the
year 2013-14 is Rs.6/- (60%) per equity
Share of Rs.10/- each (Previous Year Rs.4.5/- (45%) per equity share of Rs.10/- each).
17. Earnings Per Share
As per Accounting Standard 20, Earning Per Share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the Weighted average number of
equity shares outstanding during the year.
18. Dividend remitted in foreign currency
The company has also remitted Rs.264,441,172.50 in Indian currency to 908 non resident
shareholders holding 58,764,705 shares of Rs.10/- each as final dividend for the F Y 201213 and the company has remitted Rs.174,697,074.00 in Indian currency to 980 non resident

29

shareholders holding 58,232,358 shares of Rs.10/- each as First Interim Dividend for the F Y
2013-14 and Rs.101,637,018.00 in Indian currency to 915 shareholders holding 50,818,509
shares of Rs.10/- each as Second Interim Dividend for the F Y 2013-14 (Previous year : The
Company has remitted Rs.150,220,372.00 in Indian currency to 1060 non-resident
shareholders holding 37,555,093 Shares of Rs.10/- each).

INTERPRETATIONS ON FINANCIAL STATEMENTS

INTERPRETATION ON BALANCE SHEET OF MUTHOOT FINANCE LTD FOR THE
YEAR ENDING 31st MARCH 2014

Shares and Premium

On 29th April, 2014, your Company allotted 2, 53, 51,062 shares of Rs.10 each for
cash at a premium of Rs.155 per equity share aggregating to Rs.41, 829.25 Lakhs.
Economic Scenario
Indias economic growth rate in the current financial year remained weak at 4.7 %
Dividend
Based on Companys performance, directors had recommend for approval of the
shareholders a dividend of 10% for Equity Shares of face value of Rs.10 each (Rs.1/per share) of the Company for the financial year 2013-14 which is payable on
obtaining the approval of the shareholders of the Company on the 17th Annual

General Meeting.
Gross retail loan assets under management
The Companys Gross Retail Loan Assets under Management decreased from Rs.26,
386 Crores in FY 2012-13 to Rs.21, 861 Crores in FY 2013-14. Regulatory
headwinds in the form of lower LTV of 60% throughout the year impacted
disbursements and resulted in decline in loan portfolio. LTV has, since January 2014,
increased to 75% for NBFCs and later made the same applicable for banks. This

relaxation can positively impact the business going forward.

Average gold loan outstanding per branch
The Companys average gold loan outstanding per Branch witnessed a decline from
Rs.6.36 Crores in FY 2012-13 to Rs.5.06 Crores in FY 2013-14 on account of decline

in gold loan portfolio.

Subordinated Debts
Subordinated Debts represents long term source of funds for the Company and the
amount outstanding as on 31st March, 2014 was Rs.2635 Crores. Commercial Banks
continued their support to the Company during Financial Year. As of 31st March 2014,
borrowings from banks were Rs.5803 Crores as against Rs.10136 Crores in the
previous year. The reduction in borrowings were on account of the decline in gold
loan portfolio of Rs.4383 Crores during the year.

30

Capital Adequacy
Your Companys Capital Adequacy Ratio as of 31st March, 2014 stood at 24.69% of
the aggregate risk weighted assets on balance sheet
Public Deposits
The Company has not accepted any public deposits and as such, no amount on
account of principal or interest on public deposits was outstanding as on the date of

Balance Sheet.
Unsecured loans
The company has taken unsecured loans during the year was Rs.48,661.03 Lakhs
and the year-end balance of such loan is Rs.44,617.78 Lakhs. In our opinion, in

respect of loan taken, the repayment of principal amount and interest was regular.
Current Assets
Current Assets have increased as compare to previous year that means the firms
liquidity position is very good and he is able to meet its current obligations.

INTERPRETATION ON PROFIT AND LOSS ACCOUNT OF MUTHOOT FINANCE LTD

FOR THE YEAR ENDING 31st MARCH 2014

Revenues
The Companys revenues declined by 8% from Rs.5,387 Crores in FY 2012-13 to
Rs.4947 Crores in FY 2013-14. This was on account of reduction in gold loan

portfolio during the year.

Profit before Tax
The Companys Profit before Tax declined by 21%, from Rs.1,511 Crores in FY 2012-

13 to Rs.1193 Crores in FY 2013-14.

Profit after Tax
Muthoot Finances Profit after Tax declined by 22% at Rs.780 Crores in FY 2013-14

from Rs.1,004 Crores in FY 2012-13.

Capital Adequacy Ratio
The Companys Capital Adequacy Ratio increased from 19.62% in FY 2012-13 to
24.69% in FY 2013-14 with Tier I capital of 18.01%, on account of ploughing back of

profit for the year net of dividend payment.

Earnings per share (EPS)
Earnings per share declined to Rs.20.99 in 2013-14 from Rs. 27.02 in 2012-13 on
account of lower profits generated during the year.

Comparision of Profit and Loss as compare to previous year

Total income declined by 8% to Rs.4947 Crores as compared to previous year 2012-

13
Profit Before Tax declined by 21% to Rs.1194 Crores as compare to previous year

2012-13
Profit After Tax declined by 22% to Rs.780 Crores as compare to previous year 12-13

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The Return on Average Retail Loans declined to 3.22% in the year 2013-14 as

compared to 4.05% in fiscal 2012-13.

On account of the above, the Net Interest Margin declined to 9.42% in the year 2013-

14 as against 10.28% in fiscal 2012-13.

The Company remitted to exchequer Rs.458 Crores in the year 2013-14
Observed from the above Profit & Loss A/C Statement of Muthoot Finance Ltd it can
say that the firm has limited earnings in the year 2014.

INTERPRETATION ON CASH FLOW STATEMENT OF MUTHOOT FINANCE LTD FOR

THE YEAR ENDING 31st MARCH 2014

Observed from the above table that cash flow statement of Muthoot Finance Limited.
In the year 2013-14 variable net profit after tax, depreciation and others have
decreased.
Operating profit before and after working capital changes has decreased for the
financial year 2014.
Cash generated from operations have increased due to huge decrease in trade
receivables
Net Cash from operating activities have increased due to a huge decrease in trade
receivables and other receivables and even due to decrease in loans and advances
and liabilities. Thus this increased Net cash from operating activities.
Due to increase in sale of Bonds and sale of investment in shares and decrease in
capital work in progress there was a huge decrease in Net Cash from investing
Activities.
Due to fund borrowings form financial institute/banks there was a huge increase in
Net cash from financing activities.
Cash and Cash Equivalent increased during the year 2013-14 as compared to
previous year 2012-13 this shows that the liquidity fund is very much good in the year
2014 and company can utilise it in a way that it gain a huge profit in upcoming years.

CHAPTER - V
CONCLUSION
An Annual Report is a document published on a yearly basis to provide stockholders, the
public and the government with financial data, a summary of ownership, and the accounting
practices used to prepare the report. Annual reports measure a corporation`s financial
health. They focus on past and present financial performance, and make predictions about
future prospects. The annual report is a report issued to a company's shareholders,
creditors, and regulatory organizations following the end of its fiscal year. An annual report

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includes a balance sheet reflecting changes in the corporation`s financial worth, an income
cash flow statement, and other relevant documentation. In addition they make public details
about products and services, domestic and foreign markets and the backgrounds of
directors and executive officer. It also contain management comments, an audit report, and
various supporting schedules that may be required by regulatory organizations.
An annual report is an audited corporate document that details the business activity and
financial status of a publicly-held company over the previous year. The annual
report provides a variety of important financial data. The SEC requires all publicly traded
companies to file reports on an annual and quarterly basis, and the reports provide in-depth
information

on

company's

products, market segments,

competitors,

customers,

management and legal proceedings.

In this annual report project I have analysed annual report of Muthoot Finance Ltd.
I have studied balance sheet, income statement and cash flow statement of Muthoot
Finance for the year ending 31 st March 2014 and understood company`s financial positions
in current year comparing to previous years and gave interpretations of it. Muthoot Finance
is the fastest growing company largest loan, which offers a variety of gold trade, personal
loans, housing, education, investments, etc., low interest rates on the site, only 1% of the
Muthoot Finance Web site to keep people from all over India in place of promise and
improvement but still the main lending. Muthoot Finance delivered a stable performance and
recorded revenues to the tune of Rs.4947 Crores. Significant shareholder value was created
with our basic earnings per share at Rs.20.99 for FY 2013-14. Our book value per share
increased to Rs.114.73.
Annual report project helps us in analysing the financial position of the company practically
and to judge accordingly company`s position in the market.

BIBLOGRAPHY

17 th Annual Reports of Muthoot Finance Ltd of 2014

www.muthootfinance.com
Advance Accounting Finance Book of M.com Part 1 Semester 1 written by L.N
Chopde, D.H Choudhari, Dhiren Kanabar and Sandeep Chopde.
and published by Sheth Publications
http://en.wikipedia.org/wiki/Annual_report
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 http://en.wikipedia.org/wiki/Muthoot_Finance_Ltd
http://www.muthootfinance.com/about-us/
http://www.muthootfinance.com/fair-practices-code/

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