Muthoot Fincorp’s ₹500 Crore NCD Issue Highlights the Role of Credit Ratings in NBFC Fundraising

India’s corporate debt market continues to provide businesses and financial institutions with an alternative to traditional bank borrowing. A recent example is Muthoot Fincorp Limited’s public issue of secured, redeemable Non-Convertible Debentures (NCDs), through which the company is seeking to raise up to ₹500 crore.

The issue, which opened on 23 October 2026 and is scheduled to close on 5 November 2026, has a base size of ₹200 crore and a green shoe option of ₹300 crore. The NCDs carry tenures of 24, 36, 60 and 72 months, with different interest payment options.

The issue offers effective annual yields ranging from 8.89% to 9.25%, depending on the selected series. CRISIL Ratings has assigned a rating of CRISIL AA/Stable to the NCDs.

Beyond the issue itself, the fundraising exercise offers useful insights into how credit ratings, debt structuring and financial disclosures contribute to access to the corporate debt market.

What Does the Muthoot Fincorp NCD Issue Involve?

Muthoot Fincorp is offering up to 50 lakh secured, redeemable NCDs with a face value of ₹1,000 each. The total issue size can reach ₹500 crore, including the additional subscription option.

The issue provides multiple combinations of tenure and interest payment frequency. Investors can choose between monthly, annual and cumulative interest payment structures across the available series.

The funds raised are intended to support the company's financing and business requirements, including onward lending, repayment or prepayment of existing borrowings, and general corporate purposes.

For an NBFC, access to the debt market is particularly relevant because borrowings form an important part of its funding structure. The ability to raise funds through different channels can help diversify its liabilities and support lending operations.

Why Credit Ratings Matter in an NCD Issue

A credit rating is an independent assessment of an issuer's ability to meet its financial obligations in a timely manner. For investors evaluating an NCD, the rating provides an important reference point for understanding the credit risk associated with the instrument.

In the case of Muthoot Fincorp, the CRISIL AA/Stable rating indicates CRISIL Ratings' assessment of the instrument's credit quality and the outlook associated with it.

However, a credit rating is not a guarantee of repayment or investment returns. It is an opinion based on the information available to the rating agency at the time of assessment and may change as the issuer's financial and business conditions evolve.

For companies planning to raise funds through NCDs, the rating process is therefore an important part of debt market preparedness.

What Do Rating Agencies Examine When Assessing an NBFC?

An NBFC's credit profile is influenced by several interconnected factors. Its ability to service debt depends not only on profitability but also on asset quality, liquidity, capitalisation and the stability of its funding sources.

Some of the important areas of assessment include:

1. Asset quality

The quality of the loan portfolio is a key consideration. Rating agencies examine overdue accounts, collection efficiency, gross and net non-performing assets, credit costs and the extent of stressed assets.

2. Capital adequacy and leverage

Capital provides a cushion against unexpected losses. Agencies assess capital adequacy, gearing, leverage and the company's ability to support future business growth without placing excessive pressure on its balance sheet.

3. Liquidity and asset-liability management

NBFCs must manage the timing of loan collections against their own repayment obligations. Agencies examine liquidity buffers, maturity mismatches, access to funding and the company's ability to meet near-term liabilities.

4. Funding profile

Dependence on a limited number of lenders or funding channels can create concentration risk. The diversity of borrowing sources, maturity profile and cost of funds are important considerations.

5. Profitability and operating performance

Net interest margins, operating expenses, credit costs and return on assets help indicate whether the business can generate sustainable earnings while absorbing potential stress.

6. Management and governance

Risk management practices, internal controls, financial reporting quality, governance standards and the track record of management also contribute to the overall credit assessment.

What Can Other Businesses Learn From This Fundraising Exercise?

Although the Muthoot Fincorp issue is an NBFC fundraising example, the broader lessons are relevant to companies across sectors that are considering debt market access.

Debt market access requires financial preparedness.

Businesses should maintain organised financial statements, clear borrowing schedules, updated projections and transparent disclosures. Financial information should be consistent across audited statements, lender submissions and management reports.

Borrowing structure matters as much as borrowing size.

A company must evaluate its repayment obligations against expected cash flows. A mismatch between the maturity of borrowings and the cash generation cycle can create liquidity pressure, even when the business remains profitable.

Funding diversification can support financial flexibility.

Relying heavily on a single lender or source of finance can expose a business to refinancing risk. Exploring suitable funding channels, subject to eligibility and market conditions, can provide greater flexibility.

Creditworthiness is assessed continuously.

A rating assessment is not limited to a company's historical financial performance. Business developments, changes in leverage, liquidity, repayment behaviour and future funding requirements can influence the credit profile over time.

Credit Rating Preparedness Should Begin Before Fundraising

Companies often start preparing for a credit rating only when a lender or investor requests one. However, a more structured approach is to understand the key financial and operational factors well before approaching the rating process.

Businesses can begin by reviewing their debt profile, repayment schedules, cash flow projections, contingent liabilities, working capital position and financial disclosures.

For NBFCs, this also means maintaining a close watch on portfolio quality, collection performance, liquidity and asset-liability management.

A well-organised information base can help management respond to queries more effectively and present a clearer picture of the company's financial position during the assessment process.

Conclusion

Muthoot Fincorp's ₹500 crore NCD issue is an example of how companies can access the public debt market to meet their funding requirements. It also highlights the importance of credit ratings in providing investors with an independent assessment of the credit risk associated with debt instruments.

For businesses considering debt fundraising, the larger takeaway is clear: financial discipline, transparent disclosures and a well-understood borrowing structure are important elements of credit rating preparedness.

FinMen Advisors helps businesses prepare for the credit rating process through structured advisory support. Connect with FinMen Advisors to get the rating your business deserves.

Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies based on their independent assessment, methodologies and information available at the time of evaluation. FinMen Advisors and Consultants Private Limited provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.