11.03% Muthoot Fincorp NCD Issue Sep 2019 Review
Muthoot Fincorp NCD Issue Sep 2019 Review
Muthoot Fincorp is coming up with Secured NCD Issue that would open for subscription on 20th September, 2019. Muthoot Fincorp Limited is leading NBFC company in India. Muthoot Fincorp NCD issue interest rates are up to 10% and yield works out up to 11.03%. Muthoot Fincorp NCDs have been offered for 400 days to 36 month period. Should you invest in Muthoot Fincorp NCD September, 2019? What are the risk factors one should consider before investing in such high risk NCDs?
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About Muthoot Fincorp Limited
We are, a non-deposit taking, systemically important NBFC. The Company is one of the largest Indian NBFCs engaged primarily in the business of providing personal and business loans secured by gold jewelry and ornaments Its Gold loan products are structured to serve the business and personal purposes by individuals who do not have ready or timely access to formal credit or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. The Gold loan portfolio of the Company as of June 30, 2019 comprised approximately 28.50 Lakhs loan accounts that were serviced through 3,551 branches located across 19 states, the union territory of Andaman and Nicobar Islands and the national capital territory of Delhi. As of June 30, 2019, Company employed 16,923 employees, including 356 contracted experts in its operations. They have been engaged in the Gold loans business for over a decade and are headquartered in Kerala.
Muthoot Finance Vs Muthoot Fincorp – Are they same?
One should be clear. Muthoot Fincorp and Muthoot Finance are two separate companies without any common promoters. Muthoot Fincorp is headed by Thomas John Muthoot, while Muthoot Finance is headed by M G George Muthoot. While the two parameters are family, cousins, they have no mutual business relations.
Features of Muthoot Fincorp NCD Issue for September 2019
Issue start date: 20-September-2019
Issue end date: 18-October-2019
NCD’s are available in 8 series/options. It offers NCD for 400 days, 2 years and 3 years tenure.
Coupon interest rates are between 9% to 10%.
Yield comes up to 11.03% for these NCDs.
These are Secured Redeemable NCDs.
Interest payable monthly, yearly and on maturity depending on the option chosen by the NCD investor.
The face value of the NCD bond is Rs 1000.
Minimum investment is for the 10 bonds. Means, you need to invest for a minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
These NCD bonds would be listed on BSE. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
The base issue size is Rs 250 Crores with an option to retain over subscription upto Rs 250 Crores totaling to Rs 500 Crores.
This NCD issue security symbol is MFINCORP4.
SMC Capitals Limited is the lead manager for the issue.
NCD Prospectus can be downloaded at this link
What are the interest rates of Muthoot Fincorp NCDs for September 2019?
How the NCD issue is allocated to various investors?
There is no specific allocation would be done on this NCD issue. It would be on a first come, first serve basis.
What are the credit ratings for these NCDs?
Muthoot Fincorp NCD rating is BWR A+ – Outlook Stable by BWR Ratings. This indicates that instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.
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How Muthoot Fincorp NCDs are secured?
The principal amount of the NCDs to be issued in terms of this Prospectus together with all interest due on the NCDs, as well as all costs, charges, all fees, remuneration of Debenture Trustee and expenses payable in respect thereof shall be secured by way of
(i) The subservient charge on certain loan receivables (both present and future) of the company in favor of the Debenture Trustee; and
(ii) Exclusive mortgage and first charge over the immovable property admeasuring 5.19 cents situated at Survey No: 537, Samugarengapuram Village, Radhapuram Taluk, Tirunelveli District, Tamilnadu.
When Muthoot Fincorp NCD 2019 is proposed to be listed on stock exchanges?
These NCDs would be allotted on first come first serve basis. You can check Muthoot Fincorp NCD allotment status once it is fully subscribed. The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 6 Working Days from the date of the Issue Closure.
How is the company doing in terms of profits?
Its standalone profits are as below:
Year ended Mar-2018 – Rs 125.8 Crores
Year ended Mar-2019 – Rs 155.4 Crores
Muthoot Fincorp NCD September / October 2019 – How the returns taxed?
Since you need to apply through the demat form only, there would not be any TDS deduction on the interest paid on these NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the NCD interest as income in their income tax returns and pay income tax based on the individual tax bracket.
Why to invest in these NCDs of Muthoot Fincorp?
1) The company is earning consistent and improving margins in the last few years. This indicates that this company has ability to consistently pay the interest rates for its creditors or NCD holders.
3) These NCDs offer attractive interest rates where you can get yield up to 11.03% per annum.
4) It issues Secured NCDs. In case of any non performance of the company and the company gets closed for some reason, NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence it is safe to invest in such secured NCD options.
Why not to invest in Muthoot Fincorp NCD September 2019?
1) The Company’s credit profile may take an impact because of real estate property acquisition, since such acquisitions brings real estate sector risks.
2) Its business requires substantial capital, and any disruption in funding sources would have a material adverse effect on its liquidity and financial condition.
3) Any instructions by RBI or other regulatory authority in India directing the Company to stop the use of its premises/ branches or officials for the operations of its Group entities could materially and adversely affect its business and impact its future financial performance.
4) Its financial performance is particularly vulnerable to interest rate risk. If we fail to adequately manage its interest rate risk in the future it could have an adverse effect on its net interest margin, thereby adversely affecting its business and financial condition.
5) The Company is involved in certain legal proceedings for non-registration under certain State legislations in India relating to “money lending” activities. Any unfavorable outcome of such proceedings and the imposition of any additional restrictive statutory and/or regulatory requirements may adversely affect its goodwill, business prospects and results of operations.
6) The Company has been subject to RBI inspections and any adverse action taken could affect the business and operations of the Company.
7) Its ability to access capital also depends on its credit ratings. Any downgrade of its credit ratings would increase borrowing costs and constrain its access to capital and lending markets and, as a result, would negatively affect its net interest margin and its business.
8) If they are unable to manage the level of NPAs in its gold loans and other loans, its financial position and results of operations may suffer.
9) Since they handle high volumes of cash and gold jewelry in a dispersed network of branches, we are exposed to operational risks, including employee negligence, fraud, petty theft, burglary and embezzlement, which could harm its results of operations and financial position.
10) Other Internal and external factors can be read at the risk factors of the NCD prospectus.
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How to apply these Muthoot Fincorp NCD September 2019?
Muthoot Fincorp NCD Issue of September 2019 is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. Full form can be downloaded on the lead manager web site. For more information on this you can refer prospectus.
Should you invest in Muthoot Fincorp NCD of 2019?
Muthoot Fincorp is offering Secured NCDs that offers high interest rates up to 10% and yield up to 11.03%. Banks are reducing the interest rates month on month and the interest rates are between 6% to 8% per annum. This company credit rating is also good. However, one should note about the current NBFC crisis. Your interest payment or repayment of capital might get delayed if you are investing in NBFC companies. If you are okay with the risk factors indicated above, you can invest in these NCDs.
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Muthoot Fincorp NCD September 2019 Review
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The cumulative figures mentioned are incorrect. Kindly rectify.
Thank you for pointing this error Balachandar. We have corrected the interest rate table. Pls share your address to suresh @ myinvestmentideas.com, I would send a token of appreciation. Thank you once again for keeping our blog accurate.
The word “secured” may be misleading – subservient (i.e. second charge) charge on receivables and a small piece of land – but the company is primarily a gold loan company – how this is possible? does this not amount to cheating? Investors beware.
Thats exactly why I said the risk is not eliminated. They would give preference for repayment of NCD payments, but 100% risk is eliminated