Muthoot Finance NCD’s-Sep-2013-Interest rate up to 12.55%-Can we invest?

Muthoot Finance NCD-Sep-2013-Interest rate up to 12.55 percent-Can we investMuthoot Finance NCD-Sep-2013-Interest rate up to 12.55%-Can we invest?

India’s largest gold loan company, Muthoot Finance is issuing secured and un-secured redeemable Non Convertible Debentures (NCD’s). It comes with 11 different options, which contains 400 days to 72 months tenure. It indicates that you can double your money in 6 years. The interest rates are up to 12.55% per annum. Can we invest in Muthoot Finance NCD? What are its features and the risks involved in Muthoot Finance NCD?

About Muthoot Finance Limited

Muthoot Finance Limited is largest gold loan company in India in terms of loan portfolio and branch network. It has already issued 4 NCD’s in past and this would be 5th NCD issue.

Muthoot Finance NCD

Muthoot Finance is issuing 11 options of NCD’s in both secured and un- secured.

a) Muthoot Finance Secured NCD’s

For secured NCD the assets are backed up for principal and interest. In case unforeseen thing happening to the company, investors of NCD would still get their principal investment and interest.

b) Muthoot Finance Un-Secured NCD’s

For un-secured NCD the assets are NOT backed up for principal and interest. In case unforeseen thing happening to the company, investors of NCD would be paid after all settlements are done with secured NCD / debentures or any other secured loans. Comparing to Secured NCD’s, these un-secured NCD’s are riskier.

Also read: EPF Vs VPF Vs PPF – Which is better?

Features of Muthoot Finance NCD

  • Issue start date: 2-Sep-2013
  • Issue end date: 16-Sep-2013
  • NCD’s are available in 11 different options. Option I to X are "Secured" and XI is "Un-Secured"
  • Interest payable monthly, annually and at maturity depending on the option of NCD.
  • Face value of the NCD bond is Rs 1,000.
  • Minimum investment is for 10 bonds.  Means, you need to invest for minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
  • These NCD bonds would be listed in stock exchanges. Hence these are liquid investments.
  • Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
  • The issue size is Rs 150 Crores for secured NCD’s and Rs 150 Crores for Un-Secured NCD’s.
  • NCD ratings are CRISIL AA-/Negative by CRISIL and ICRA AA-/Negative by ICRA.
  • Draft Prospectus:

Below are the Interest rates details.

Muthoot Finance NCD-Sep-2013-Interest chart

How is company is doing in terms of financials?

  • Revenues of the company has grown from Rs 4,549 Crores (FY 2011-12) to Rs 5,387 Crores (FY 2012-13) indicating a growth of 18%.
  • Profits increased from Rs 892.02 Crores (FY 2011-12) to Rs 1004.39 Crores (FY 2012-13) indicating a profit growth of 13%.
  • Non Performing Assets (NPA) of the company are 0.56% (FY2011-12) Vs 1.99% (FY 2012-13).

Why to invest?

  • Company is doing well in terms of revenues and profits.
  • It offers secured NCD’s where your money is safe. Means in case of any unforeseen thing happening to company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
  • Attractive interest rates between 11.50% to 12.55% per annum
  • You can double your money in 6 years.

Why not to invest?

  • Capital adequacy ratio as per RBI limit should be 15% and actual as on 31-Mar-2013 is 19.62% which is outside RBI limit.
  • Gold finance companies are riskier. Decline in gold prices (which happened 3 months back), can pose high risk to such business.
  • Increase in NPA’s for year ending Mar-2013 is a concern.

How to apply?

Majority of the stock brokers who maintain demat accounts are offering the service. You can also directly apply through ICICI Direct or any other institutions indicated in application form, if you would like to go for physical form. However you need to have these NCD's in demat form to sell them.

Also Read:Best ELSS Mutual funds to invest for tax savings in 2013

SREI NCD Vs Muthoot Finance NCD’s

Currently SREI secured NCD issue is also running. Though both of them would be available for next two weeks, they would be allotted on first-come-first serve basis.

Interest rates: SREI secured NCD offers 11.50% interest whereas Muthoot is offering 12.55% interest rates.

Security: SREI NCD is secured. Muthoot Finance NCD is offering Secured NCD and un-secured NCD. Unsecured NCD’s does not provide any security and investors should be little cautious about this

TDS: SREI is not deducting any TDS on interest amount. However Muthoot NCD is silent on this option, hence we are assuming that it would deduct TDS on interest payment.

Conclusion: My suggestion to investors is to invest in Secured NCD’s of Muthoot Finance. Don’t go for un-secured NCD where there is risk. Under stock market volatility where investors are thinking where to invest, secured NCD issue would definitely benefit investors.

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Muthoot Finance NCD (Sep-2013)


  • Alvin

    Hello Suresh,

    Your website is very informative. And with regard to the TDS I guess it is applicable as far as I understand from the prospectus. Also, I have a doubt with regard to Secured NCD with monthly interest payment. How does that work because assuming from the table, a 24 month maturity with 11.5% interest payable on a monthly basis would mean high profits (which is good actually), ex. if i invest 1,00,000 on the above said secured NCD then would I be receiving 11,500 every month assuming interest rate stays the same? I am just 24 and I make more than decent pay and I am a lawyer employed in Europe, but I am not a NRI , so you can classify me as a high risk taker, so let me know whether my calculation was correct if it is wrong then please do correct me. Also the ICRA rating is AA- for both secured and unsecured NCD which is actually good but the amount of profits one can make it does come across as a junk investment (though I don't care much). Thanks in advance.

    • Alvin, The monthly interest would be payable after dividing this by 12. Means Rs 1 L @ 11.5% interest would fetch Rs 11,500 per annum. Per month such interest works out to be Rs 958.33. You indicated as Rs 11,00 per month whic is incorrect. If you are Indian citizen, but working in Europe, you would fall under NRI only. Your statement says you are not NRI, please clarify. NRI’s cannot apply for such NCD. 

  • Vish


    Could you please let me know if NRI's can invest in this secured product and will this be taxable ?


  • Vish


    Is it possible for NRI's to invest on the Secured NCD using ICICI direct? Does the interest earned is taxable ? 



  • Sataveerappa

    Hi Mr.Suresh,

    Is it possible to invest without Demat account. If yes how it has to be done.




    • Hi Satya, Yes you can invest without demat account. Please visit any of the lead managers like ICICI Securities office or any other managers of this issue. You can see their details in application form. You can fill the form and attach cheque and they would get alloted or rejected.

  • Priyesh Jain

    Should we buy them before listing or after listing, what is the disadvantage of buying after listing.

    • Hi Priyesh, You can buy from secondary market. But they would be available at premium rates. Means a Rs 1,000 bond would be available at higher than this rate. It could be for various factors like interest rates falling or interest due dates are coming nearer etc.

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