Muthoot finance has issued secured and unsecured NCD’s recently in March/April, 2014. This company has again come up with similar interest rates in their latest NCD’s now. Muthoot Finance NCD of May 2014 would open for subscription on 26th May, 2014 and end on 26th June, 2014. The interest rates are as high as 11.75% per annum. I already provided my analysis earlier several times on Muthoot Finance NCD’s, however, I would cover some important points here in this article. Should you invest in Muthoot Finance NCD of May 2014?
About Muthoot Finance Limited
Muthoot Finance is largest gold loan company in India in terms of loan portfolio and branch network. It has already issued 7 NCD’s in the past and this would be a 8th NCD issue.
Muthoot Finance NCD May 2014
Muthoot Finance is issuing secured and un-secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 250 Crores with an option to retain another Rs 250 Crores aggregating to Rs 500 Crores. It comes with 11 different options, which contains 400 days to 75 month tenure.
The Muthoot Finance issue contains 11 options of NCD’s and 1 to 10 are secured and 11th option is unsecured.
a) About Muthoot Finance Secured NCD of May 2014
For secured NCD’s the assets are backed up for principal and interest. In case of anything happening to company, investors of NCD would still get their principal investment and interest.
b) About Muthoot Finance Unsecured NCD’s of May 2014
For un-secured NCD the assets are NOT backed up for principal and interest. In case something happens to company performance and company is closed, investors would be given normal preference in repayment of capital and interest.
Features of Muthoot Finance NCD of May/June 2014
- Issue start date: 26-May-2014
- Issue end date: 26-Jun-2014
- NCD’s are available in eleven different options.
- Interest payable monthly, annual and cumulative, depending on the option of NCD.
- The face value of the NCD bond 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.
- Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
- ICRA has given a rating of AA-/Stable which indicates a high degree of safety for payment of principal and interest (Letter dated 8th May, 2014). Earlier NCD ratings are CRISIL AA-/Negative by CRISIL and ICRA AA-/Negative by ICRA.
- The prospectus can be downloaded from the SEBI website at this link
Here are the interest rates on the May 2014 NCD issue of Muthoot Finance
How is the company doing in terms of Financials?
- Revenues of the company have grown from Rs 4,549 Crores (FY 2011-12) to Rs 5,387 Crores (FY 2012-13) indicating a growth of 18%. Its revenues for the 9 months ending Dec-2013 are Rs 3,788 Crores.
- Profits increased from Rs 892.02 Crores (FY 2011-12) to Rs 1004.23 Crores (FY 2012-13) indicating a profit growth of 13%. Its profits for the 9 months ended Dec-2013 are Rs 599 Crores.
- Non Performing Assets (NPA) of the company are 0.56% (FY2011-12) Vs 1.99% (FY 2012-13). NPA for 9 months ended Dec-2013 is also 1.99%.
Why to invest?
- Company is doing well in terms of revenues and profits.
- It offers secure NCD’s also where your money is safe. Means in case of anything 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 10.50% to 11.75% per annum
- You can double your money in 75 months (6 years, 3 months)
Why not to invest?
- There are other good rated NCD’s offering high interest rates, which you can buy in the open market.
- Gold finance companies are riskier. Decline in gold prices (which happened last year), can pose high risk to such business.
- Increase in NPA’s for the year ending Mar-2013 and 9 months ended Dec-2013 is a concern.
How to apply?
If you have demat account, you can apply through your demat broker online. These can be easily sold at later point of time if you can take them in demat form, however you can sell at market price only. You can also apply in physical form by visiting the company website and downloading the application form and preparing the cheque and submitting at collection centres.
Conclusion: As indicated in my previous articles about Muthoot Finance NCD’s, while I am interested to get higher interest, I am equally interested to protect my investment. I would not look for any unsecured NCD’s. I would personally prefer to invest in Secured NCD. If you want to diversify your portfolio, you can invest a small amount of your portfolio in Muthoot Finance Secured NCD’s.
Readers, are you investing in any NCD’s these days? What are your experiences on this?
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Muthoot Finance May 2014 NCD