Mahindra and Mahindra Financial Services Ltd: NCD Issue

Mahindra & Mahindra Financial Services Ltd. : NCD Issue
Mahindra and Mahindra Financial Services Limite
d (MMFSL or Mahindra Finance)  plans to raised Rs 2,000 crore by an issue of unsecured non-convertible debentures (NCDs) which consists of base issue size of Rs. 250 crores and Rs. 1750 crores as Green shoe option. An year earlier i.e. in June 2016, MMFSL had raised Rs 1,000 crore through public offer of NCDs. The company is offering interest rates in the range of 7.86% to 8.05% for a tenure of 7 years to 15 years.

NCD Issue Details
Issue opens: Monday, July 10, 2017
Issue closes: Friday, July 28, 2017  ( But is likely to close much earlier)
Allotment: First Come First Serve Basis
Face Value  & Issue Price: Rs. 1000 per NCD
Issue Size: Base Issue Size of Rs.  250 Crores with option to retain up to Rs. 1,750 crore  aggregating upto Rs. 2,000 crore
Unsecured Subordinated Redeemable Non-Convertible Debenture
Minimum Application: 10 NCDs (Rs.10000) & in multiple thereafter
Maximum Application – for Retail: 1000 NCDs (Rs.10 lakhs )
Rating: IND AAA/ Outlook Stable’ by India Ratings & Research Pvt Ltd., ‘BWR AAA, Outlook: Stable by Brickwork
About Mahindra Finance (MMFSL)
The company was initially incorporated in 1991 as Mahindra Finance, a non-banking financial company (NBFC), by M&M, the majority shareholder, along with Kotak Mahindra as a strategic investor. In 1998, M&M bought out Kotak Bank stake and it became its wholly owned subsidiary MMFSL . M&M holds 51.2 % stake in the company.
Mahindra Finance is one of the leading non-banking finance companies (“NBFCs”) with customers primarily in the rural and semi-urban markets of India. MMFSL is the largest financier of M&M’s vehicles providing financing to about one-fourths of total sales of M&M. n addition the company provides wholesale inventory-financing to dealers and retail-financing to customers in the United States for purchase of Mahindra group products through Mahindra Finance USA LLC, its joint venture with a subsidiary of the Rabobank group.

Its key subsidiaries include Mahindra Rural Housing Finance Ltd (MRHFL) and Mahindra Insurance Brokers Ltd (MIBL). In August, 2015, Tech Mahindra Ltd, along with Mahindra Finance, received in-principal license from Reserve Bank of India for setting up a payment bank . Mahindra Finance also provides insurance broking solutions to individuals and corporates through MIBL. MMFSL is the sponsor to the mutual fund and Mahindra Trustee Company Private Limited, a 100% subsidiary of MMFSL, is the trustee to the mutual fund which was launched in 2016. 

Other Information
  • Cheque in Favor of: “MMFSL NCD II Public Issue – Escrow Account”.
  • Interest on Refund Amount: 5.00% per annum
  • Interest on Application Amount: 7.50% per annum

Form of the MMFSL NCD can be printed from this link Click Here or can be obtained from most of the stock brokers

Specific Terms of NCDs

These NCDs, with fixed rate of interest, are offered under three different Series. For Category I (QIB Portion) and Category II (Corporate Portion) holders, the coupon rate for Series I, Series II and Series III having tenure of 7 years, 10 years, 15 years respectively, shall be 7.75%, 7.90% and 7.95% p.a., respectively, payable annually.

mahindra ncd july 2017 issue

Comparison with Earlier NCD issue of MMFSL & other NCDs:

    As  on 07-07-2017
Company M&M Fin DHFL Tier1 DHFL Tier II Edelweiss Hsg Fin
BSE Code 935752 935814 935840 935788
Market Price 1065 1099.9 1089.95 1061.5
Coupon Rate 9 9.30 9.25 10
Yield to Maturaity (YTM) 8.08% 9.04% 8.98% 8.93%
YTM after brokerage @ 30p 8.03% 8.98% 8.91% 8.87%
Type Secured Secured Secured  Secured
Face Value 1000 1000 1000 1000
Allotment Date 6.6.16 16.8.16 9.9.16 19.7.16
Redemption   Date 6.6.26 16.8.26 9.9.23 19.7.26
Next Interest Date 6.6.18 16.8.17 9.9.17 19.7.17
ISIN INE774D08MA6 INE202B07HV0 INE202B07IO3 INE530L07228
Interest Frequency Annual Annual Annual Annual
Mahindra Finance NCD: Assessment :
  • This year budget has given a fresh impetus to rural economy and MMFSL is likely to benefit from the same.
  • Mahindra Finance has a distinguished past & support of M&M group provides it a good degree of dependability and financial strength.
  • Even though the offered rate of Interest is slightly  lower than YTM of already listed MMFSL NCDs (Mahindra Finance NCD) and some other companies, trading in NCDs is not in large volumes and one can buy in bulk only in new offers or maximum at the time of listing. Hence new offers receive good response whereas the NCD on listing may trade lacklustere or even  at a slight discount.This NCD however at 7.95% coupon is not very attractive. 
  • Due to its size & Group reputation, Mahindra NCD issue have in the past evoke evoked good  interest & also subsequent liquidity. This NCD with coupon rate of  7.95% / 8.05% may not be that attractive. 
  • Suitable for persons who are in low tax bracket & retiring persons. Not suitable for those in higher tax bracket bracket.
  • Those desirous of allotment in Mahindra Finance NCD should apply early as issue  is on first come first basis.
  • Upfront sharing of brokerage by the broker may increase the yield
  • Immediate Listing gain could be marginal to Nil and a lower listing cannot be ruled out in Mahindra Finance NCD and is a more likely outcome.
  • 8% GOI Taxable bonds(RBI Bonds)  Click Here for Details which are still offering 8% annual interest for a six  year period is a much safer option.
  • Iam not applying in this NCD and may buy these NCds if they trade at reasonable discount on listing.

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock/NCD  I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk. 

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