13.4% Muthoottu Mini Financiers NCD-Oct-2014

Muthootu Mini Financiers NCD-Oct-2014Muthoottu Mini Financiers NCD-Oct-2014

After 9 months, Muthootu Mini Financiers Limited is again offering NCD’s, where interest rates are up to 13% and yield works out to be 13.43% for 66 months tenure NCD. Like Kosamattam Finance, even Muthootu Mini Financiers is Non Banking Finance Company operating from Kerala and has a presence in South India. How is current Muthootu Mini Financiers NCD of Oct-2014 looking like? What are the positive features of this NCD? Are there any risks involved in Muthootu Mini Financiers NCD October, 2014? Among Kosamattam Finance NCD and Muthoottu Mini Finance NCD, which is better ?

About Muthoottu Mini Financiers Limited

This company is a non deposit taking systemically important NBFC in the Gold Loan sector lending money against the pledge of used household gold Jewellery (‘Gold Loans’) in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Goa, Haryana, Uttar Pradesh and Maharashtra. They also provide short-term personal loans primarily to individual customers who require immediate availability of funds. Their Gold Loan portfolio as of March 31, 2013 and March 31, 2014 comprised of 3,74,830 and 2,75,895 gold loan accounts respectively, aggregating  1,81,589.13 lacs and 1,76,881.16 lacs which is 98.87% and 94.80% of our total loans and advances as on March 31, 2013 and March 31, 2014. They have a network of 1,053 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Goa, Haryana, Uttar Pradesh and Maharashtra.

Also Read: How Initial Public Offerings (IPO) has created wealth for investors in last 1 year?

Features of Muthoottu Mini Financiers NCD of Oct-2014

  • Start date: 29-Sep-2014
  • End date: 28-Oct-2014
  • NCD’s are available for 18 months, 36 months, 42 months and 66 months tenure.
  • It offers monthly, annual and cumulative options.
  • It offers both secured and un-secured NCD’s. Secured NCD’s are for 18, 36 and 42 months tenure. Unsecured NCD’s are offered for 66 month tenure only.
  • Bond face value is Rs 1,000.
  • Minimum investment is for 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 (provided the buyer is available on that date when you sell such NCD’s).
  • NCD’s can be invested through Demat account or Physical form.
  • Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
  • The issue size is Rs 150 Crores with an option to retain another 150 Crores aggregating to Rs 300 Crores.

Below is the Interest rate chart

Muthoothu Mini Financiers NCD Oct-2014

How the company is doing in terms of Financials?

1) Below are the details profit after tax

  • Year ended Mar-2010 – Rs 408 Lakhs
  • Year ended Mar-2011 – Rs 389 Lakhs
  • Year ended Mar-2012 – Rs 2130 Lakhs
  • Year ended Mar-2013 – Rs 4731 Lakhs
  • Year ended Mar-2014 – Rs 3366 Lakhs

2) Non Performing Assets (NPA) of the company are 0.33% for FY2012-13 Vs 0.71% in FY2013-14

Why to invest in Muthoottu Mini Financiers NCD of Oct-2014

  • The company is earning good profits in the last 5 years, hence less risk for payment of interest on these NCD’s. However, one should note that last year profits was reduced compared to previous years. We have seen this even in Kosamattam Finance where NCD’s are open for subscription now.
  • It offers secure NCD’s which are secured by movable assets, including book debts, receivables, etc. Means in case of any unforeseen thing happening to company, investors of NCD would get preference in re-payment of the principal. However, there could be delays. Hence it is relatively safe to invest in such secured NCD’s.
  • Attractive interest rates of 12.75%. You can double your money in 66 months. Senior Citizens would get additional 0.5% more. However, they need complete KYC norms to get additional interest.
  • India Ratings rates these NCD’s as IND-RA BB+ (Double B plus).

Why not to invest in Muthoottu Mini Financiers NCD of Oct 2014?

  • This Company has received a show cause notice dated July 25, 2014 from the Reserve Bank of India interalia alleging violation of the RBI directions and circulars. Incase RBI decides to take action against this Company, its reputation may suffer.
  • This Company has received a show cause notice dated July 2, 2013 from the Reserve Bank of India. Incase RBI decides to take action against this Company's ability to conduct business may be severely affected, which could in turn result in a material adverse effect on the business, prospect and results of operations.
  • Company and its Directors are subject to certain legal proceedings and any adverse decision in such proceedings may have a material adverse effect on the business and results of operations.
  • Company business faces increasing competition in the business which may result in declining interest margins.
  • The financial performance of the company is primarily dependent on interest rate risk. If they are unable to manage interest rate risk in the future it could have an adverse effect on net interest margin, thereby adversely affecting the business and financial condition of the company.
  • In case profits decline in the future too, there could be a delay in interest payment and repayment of principal invested.

You can download the prospectus of Muthootu Mini Finance Limited NCD of October, 2014

How to invest?

You can login to your demat account and apply. In case you want to apply in physical form, the process is indicated in the prospectus.

Kosamattam Finance NCD Vs Muthoottu Mini Financiers NCD of Oct 2014

  • Interest: Kosamattam Finance NCD offers higher interest rates by 0.25% for all tenures except for 66 month cumulative option. For 66 months tenure cumulative option both these NCD’s would double your money in 66 months.
  • Credit Rating: Kosamattam Finance NCD’s are rated as BBB- (Triple B minus) whereas Muthoottu Mini Financiers ratings are BB+ (Double B plus). Hence Muthootu Mini Financiers rate high and preferred.
  • Profits: Both the companies are doing well in profits, however previous year profits are declined for both these companies which is a concern.
  • NPA: Nonperforming assets for Kosamattam Finance for FY14 is 0.17%, whereas for Muthootu Mini Financiers is 0.71%. Non Performing assets are where the company is not getting repayment from customers who has taken loan from the company. Low NPA is good as it would not impact profits. Hence Kosamattam Finance scores high in this regard.

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Conclusion: Muthootu Mini Finance offers good interest rates on these NCD’s. However decline in profits in last financial year is a concern. High risk investors can invest in Secured NCD’s upto 42 month tenure, after considering negative factors indicated above. Personally, I would not be investing in such high risk NCD’s.

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Muthoottu Mini Financiers NCD-Oct-2014

Suresh KP


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    Sunil Kumar.S

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