Muthoot Capital Services Limited_Partial Guarantee (Originator: Muthoot Capital Services Limited) Rating Reaffirmed
Rating Action
@A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive ‘Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and April 27, 2021 circular ‘Standardizing and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ by SEBI & Instrument yet to be issued Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. 1 crore = 10 million Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale Crisil Ratings has reaffirmed its rating of ‘Crisil AA+ (CE) /Stable' for Rs.150 crore of Non-Convertible Debentures (NCDs) issued by Muthoot Capital Services Limited (MCSL; rated ‘Crisil A+/Crisil PPMLD A+/Positive/Crisil A1+’). Rating of ‘Provisional Crisil AA+ (CE) /Stable’ for the remaining Rs 150 crore of proposed NCDs, which is expected to have the same structure, is also reaffirmed.
MCSL issued Rs 150 crore of NCDs on October 17, 2025.. The NCDs have monthly repayment of principal and interest. The door-to-door tenure of the instrument is 72 months from issuance. As after February 2026 payouts, the outstanding principal is Rs 141.67 crore. The amortisation has resulted in build-up of guarantee from 65% of issuance size to 68.8% of principal outstanding. The remaining Rs 150 crore of proposed NCDs are expected to have the same structure as issued NCDs.
The guarantee is unconditional, irrevocable and legally enforceable. The guarantee amount is fixed till the value covers outstanding principal and 90 (ninety) day interest on outstanding principal . At that stage, the guarantee can be reset to this aforesaid value. Based on on the scheduled repayments, guarantee can be reset post 23 months of payouts for Rs 150 crore of NCDs and 27 months of payouts for Rs 150 crore of proposed NCDs.
Collection and payout account (CPA) is opened by the debenture trustee for the purpose of receiving all payments from the issuer related to these NCDs. The issuer has provided Debt Service Reserve Account (DSRA) in the form of fixed deposit (FD) with lien and set-off marked in favour of the debenture/ security trustee. This DSRA is rolling; at the time of issuance was equal to first month’s interest and principal payable to NCD holders and subsequently, on or prior to each payout date, will be equal to the following month’s interest and principal payable to the NCD holders. DSRA, to this available extent, will be shifted to the CPA within 3 business days of occurrence of defined Events of Non-Compliance (EONC; refer to EONC section under List of covenants). Hence, DSRA amount available in CPA account is expected to provide support to the NCD holders with limited linkage to the issuer in case of default. Additionally, upon occurrence of EONC, issuer shall top-up the DSRA with additional subsequent month’s principal and interest payment due to NCDs, in the form of FD with lien marked in favour of the debenture trustee.
NCDs are also secured by pari-passu ranking floating charge over pool of eligible pool receivables originated by the issuer identified from time to time that meets the defined eligibility criteria. Issuer has to maintain security cover of atleast 1.10 times of the outstanding principal of the NCDs and any amount invoked (not replenished) under the guarantee. Issuer has opened an escrow account (with a pari-passu charge) to route payments of receivables, this account is operated by the security trustee. Cashflows routed through Escrow each month shall be higher of 1.20 times the sum of principal instalment due for the relevant month and utilised guarantee amount (if any).
Effectively, the Security Trustee (acting for the benefit of the Debenture Trustee and the Guarantor) shall have a pari-passu ranking floating charge upon the identified loan receivables, pari-passu ranking charge over the escrow account and first ranking charge over the DSRA.
In case of occurrence of EONC, the cashflows in escrow account will get trapped and not flowback to the issuer even if all payouts are fully made till EONC is cured and confirmed as such by the Trustee and Guarantor. On a monthly basis, the cashflows in escrow and CPA account will be used to make all due payments to the NCDs holders pertaining to this and previous periods (if unpaid). It is clarified that the utilisation of such cashflows shall only be made for payments on the NCDs due for the period and not for any prepayment of the Debentures.
Post that the cashflows will be apportioned in the order of replenishment of DSRA in CPA to extent utilised, replenishment of guarantee amount to extent utilised, replenishment of DSRA outside of CPA in form of FD to extent utilised and payment of guarantee fees/ or guarantee utilisation interest due but unpaid.
In case of Events of Default (EOD; refer to EOD section under List of covenants), all outstanding payments are expected to be made forthwith, however they are promised to be due and payable only 90 (ninety) days from receipt of the acceleration notice by guarantor or EOD notice[1] (whichever is earlier), or prior to 1(one) day from original maturity date of the NCDs, whichever is earlier.
In the absence of the above structural features, the rating of the NCDs would have been the same as rating of the Issuer. [1]Upon the occurrence of an Event of Default, the Debenture Trustee shall notify the guarantor immediately (and on the same day) [“EOD Notice”]. Pursuant to this, a notice is issued by the Debenture Trustee (acting on the instructions of Special Majority Debenture Holders) to the guarantor requiring them to make accelerated payment (the “Acceleration Notice”) |
Analytical approach & Rating assumptions: For arriving at the rating, Crisil Ratings has analysed the credit quality of the issuer and structural features envisaged as part of the issuance. Consequently, in addition to the cashflows from the issuer (including recovery post default, if any), DSRA and unconditional and irrevocable partial guarantee provided by GuarantCo provide support to NCD payments.
These aspects have been factored by Crisil Ratings in its rating analysis.
Key Rating Drivers & Detailed Description: Strengths:
Weakness:
The amount raised through issue of these NCDs will be utilised towards lending to electric vehicle opportunities. The EV book for MCSL has limited seasoning and performance of this books through cycles is yet to be seen. |
Liquidity: Strong DSRA, equal to subsequent month’s principal and interest payment due to NCDs, and guarantee would provide liquidity support to the issuance. For Rs 150 crore of NCDs issued by MCSL, the guarantee available is 68.8% of principal outstanding and can be reset once it covers future principal and 90-day interest payment due to NCD holders (post 23 monthly payouts). The outstanding Guarantee is sufficient to cover next 34 months of NCD payouts.
For the remaining Rs 150 crore of proposed NCDs, the partial credit guarantee will cover 65% of principal at the time of issuance. Guarantee can be reset once it covers future principal and 90 day interest payment due to NCD holders after 27 months of payouts. Assuming no payment from the issuer from day 1, the available liquidity is sufficient to cover first 33 months of NCD payouts.
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Rating Sensitivity factors Upward
Downward
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Adequacy of credit enhancement Crisil Ratings has considered multiple scenarios to test the adequacy of the support available in the structure. Crisil Ratings believes that the instrument will have very high degree of safety regarding timely servicing of financial obligations even in the most likely stress scenarios.
Unsupported ratings: Crisil A+ Crisil Ratings has introduced 'CE' suffix for instruments having explicit Credit Enhancement feature in compliance with SEBI's circular dated June 13, 2019. |
Key drivers for unsupported ratings The key rating drivers of the unsupported rating are detailed in Crisil Ratings’ latest rating rationale on debt instruments issued by MCSL. |
Additional disclosures for Provisional ratings (for remaining Rs 150 crore issue): For assigning the provisional rating, Crisil Ratings has considered the provisional rating to be contingent upon occurrence following steps or execution of following documents, as applicable:
Additional documents executed for the transaction, if any, should also be provided to Crisil Ratings.
The provisional rating shall be converted into a final rating following receipt of transaction documents duly executed and/or confirmations on completion of pending steps within 90 days from the date of issuance of the instrument.
The final rating assigned after the end of 90 days (or following an extension of upto 90 days, if any, granted by the rating committee of Crisil Ratings after considering case specific considerations) shall be consistent with the available documents or completed steps, as applicable. |
Rating that would have been assigned in absence of the pending documentation: Crisil A+ In compliance with SEBI’s Master circular dated May 16, 2024 (erstwhile SEBI’s Master circular dated July 03, 2023), Crisil Ratings would have assigned a rating of ‘Crisil A+’ in absence of pending steps/ documentation considered while assigning provisional rating as mentioned above.
Risks associated with provisional nature of credit rating A prefix of 'Provisional' to the rating symbol indicates that the rating is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable. In case partial / complete documentation received and/or completion of steps deviates significantly from the expectations, the rating may be subject to rating actions, including placing the rating on watch or a rating/outlook change, depending on status of progress on a case to case basis. In the absence of the pending steps / documentation, the rating on the instrument would have been Crisil A+. |
About the company- Originator/Servicer profile Incorporated in 1994, MCSL is a deposit-taking, systemically important non-banking financial company (NBFC). Though the company started operations in 1995, it commenced lending activities in 1998 after acquiring an NBFC license. Initially, it provided gold loans, but subsequently, as the group scaled up its gold financing business in MFL, MCSL entered the two-wheeler financing segment in fiscal 1998 and gradually exited the gold loan business. MCSL is listed on the Bombay Stock Exchange and the National Stock Exchange and is one of the listed companies of MPG. As on June 30, 2025, its AUM was Rs 3210 crore. Around 91% of the total portfolio was two-wheeler loans.
Key Financial Indicators
About the Guarantor GuarantCo was established in 2005 to help close the infrastructure funding gap in lower income countries across Africa and Asia by offering local currency credit solutions through mobilisation of private sector capital. GuarantCo is part of the Private Infrastructure Development Group (PIDG) and is funded by the governments of the United Kingdom, Switzerland, Australia and Sweden, through the PIDG Trust, the Netherlands, through FMO and the PIDG Trust, Canada, through the PIDG Trust and a repayable facility, plus France through a stand-by facility. It operates along the project life cycle and across the capital structure. GuarantCo’s portfolio and the investment strategy, set by PIDG, are managed and executed by fund manager GuarantCo Management Company.
Key Financial Indicators (GuarantCo)
Non-exhaustive list of key covenants Payment mechanism Till the time there is no utilisation of DSRA
In the event the DSRA is utilized even partially to make payment of principal and / or interest on the NCDs, then from the immediately succeeding payout date onwards, the repayment mechanism shall be altered to the following:
Key Events of Non-Compliance (EONC)
Consequences of EONC Until the Event of Non-Compliance is cured (to be confirmed by debenture trustee/Guarantor in writing), the following consequences shall apply:
Key Event of default (EOD) declarable by NCD holders Debenture trustee (upon instruction of the Special Majority debenture holders) have the option to declare EOD upon the occurrence of following events:
Upon occurrence of an Event of Default, External Payment default or Cross Default and if at this point the guarantee amount covers outstanding principal and interest payable for 90-days on such principal, then EOD is deemed to be declared automatically and the occurrence of EOD shall be intimated (EOD Notice) by Debenture Trustee to the NCD Holders, the Guarantor, the Security Trustee and the Company immediately (and on the same day as on the occurrence of the Event of Default). Once confirmed by Special Majority NCD holders with seven business days, consequences of EOD shall apply. If confirmation is not provided within stipulated timeline, it is deemed provided.
Key EOD declarable by Guarantor Guarantor may declare an EOD only upon the occurrence of any of the following conditions and not in any other circumstance
Consequences of EOD In case of Events of Default (EOD; refer to EOD section under List of covenants), all outstanding payments are expected to be made forthwith, however they are promised to be due and payable only 90 (ninety)days from receipt of the acceleration notice by guarantor or EOD notice (whichever is earlier) or prior to 1(one) day from original maturity date of the NCDs, whichever is earlier |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Instrument yet to be issued &Proposed to be listed |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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