Muthoot Finance NCD Review-April 2018

Muthoot Finance is coming out with a public issue of  secured redeemable non convertible debentures (NCDs) of face value of Rs 1,000 each aggregating to Rs. 500 crore from this issue, with an option to retain over subscription to the tune of Rs. 3,000 crore. Muthoot Finance NCD issue has total ten investment options for secured NCDs with monthly or annually interest payment frequency or on maturity redemption payments with the yield from 8-9 % annually in periods ranging from 400 days to 60 months.

Muthoot Finance NCD Issue

Muthoot Finance NCD issue:

Issue Type Secured Redeemable Non-Convertible Debentures
Issue Date 09 Apr 2018 to 08 May 2018
Issue Size Base Issue Rs.500 Crore with an option to retain over subscription up to the Shelf Limit of Rs.3,000 crores.
Face Value Rs.1,000/-
Minimum Application Size Rs.10,000/- (10 NCDs) thereafter in multiples of Rs.1000/- (1 NCD)
Credit Rating [ICRA] AA (Stable)’ by ICRA and “CRISIL AA/Stable” by CRISIL
BRLM 1) Edelweiss Financial Services Limited
2) A.K. CAPITAL SERVICES LTD
About Muthoot Finance:

Muthoot Finance Ltd (MFL) is the flagship company of the Kerala based business house ‘The Muthoot Group’, which has diversified operations in financial services, healthcare, real estate, education, hospitality, power generation and entertainment. MFL has a long and established track record of operating in the gold loan business and is India’s largest gold loan focused NBFC in  terms of loan portfolio. Muthoot Finance  provides personal loans and business loans secured by gold jewelry, or Gold Loans, primarily to individuals who possess gold jewelry but are not able to access formal credit within a reasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. Muthoot Finance  Gold Loan portfolio as of December 31, 2017 comprised approximately 7.58 million loan accounts in India tare serviced through 4,303 branches.

Muthoot Finance NCD issue Structure

Annual /Monthly Interest payable Option
I II III IV V VI
Tenor 24 months 38 Months 60 Months 24 months 38 Months 60 Months
Interest Payment Monthly Monthly Monthly Annually Annually Annually
Rate of Interest 8.25.% 8.50.% 8.75.% 8.50.% 8.75.% 9.00%
Cumulative
option / series VII VIII IX X
Tenor 400 days 24 months 38 Months 60 Months
Interest Payment Cumu Cumu Cumu Cumu
Yield p.a. 8.00.% 8.25.% 8.50.% 8.75%
Amount on redemption 1088.28 1171.81 1295.38 1521.05

Muthoot Finance NCD issue is structured into following categories of Investors: 
Category I – QIBs– 20% of the issue ; Rs. 600 crore
Category II – Non-Institutional Investors & Corporates – 20% of issue; Rs. 600 crore
Category III – HNIs i.e. above Rs. 10 lakhs – 30% of issue: Rs. 900 crore
Category IV – Retail  Investors, including HUFs – 30% of  issue; Rs. 900 crore
<

Muthoot Finance  had earlier approached the markets in April  2017 with an issue of secured and unsecured NCDs of Rs. 200 crore with an option to retain upto Rs. 2000 crores. The debentures at that time carried a similar rating of AA by ICRA and AA (Stable) by Crisil.

Assessment

  • NCDs are taxable, thus the return get reduced by individual’s Tax bracket. However as they are held in Demat form TDS is not deducted.
  • Muthoot Finance has been regularly raising money from Public through NCDs. This is the 18th series of Public Issue of NCDs by the company and is coming after a gap of one year..
  • There are ten investment options for Secured NCDs with Monthly or Annual interest payment frequency or on maturity redemption payments with effective yield p.a. ranging from 8.00% to 9.00%.
  • The issue of  Muthoot Finance NCD has almost same interest rate as the recent issue of Edelweiss Retail Finance NCD which has recently listed.
  • Some investors are able to get upfront brokerage from brokers in range 1% which increases the YTM (Yield to Maturity) by a percent.
  • Muthoot Finance NCDs will be listed only on the BSE.
  • The rates offered by Muthoot Finance NCD issue are not very attractive and are at same levels as in April 2017. 
  • The newly listed NCDs of Edelweiss Retail Finance NCD have been able to trade at par or about 1-1.5% above. 
  • I do not intend to apply in Muthoot Finance NCD issue.

Leave a Reply