After 6 months, Kosamattam Finance is again offering NCD’s, where interest rates are up to 13% and yield works out to be 13.8% for 66 months tenure NCD. This Non Banking Finance Company is operating from Kerala and has a presence in South India. How is current Kosamattam Finance NCD of Oct-2014 looking like? What are the positive features of this NCD? Are there any risks involved in Kosamattam Finance Limited NCD Oct-2014?
About Kosamattam Finance Limited
Kosamattam is a one of the gold loan company registered in Kerala. The company is a non deposit taking NBFC primarily engaged in the gold loan business, lending money against the pledge of household Jewellery in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi and in the Union Territory of Puducherry.
Features of Kosamattam Finance Secured NCD-October-2014
- Start date: 30-Sep-2014
- End date: 29-Oct-2014
- NCD’s are available for 18 months, 36 months, 39 months and 66 months tenure.
- It offers monthly and cumulative options.
- It offers both secured and un-secured NCD’s. Secured NCD’s are for 18, 36 and 39 months tenure. Un-Secured NCD’s are offered for 66 months 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 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 100 Crores with an option to retain another 100 Crores aggregating to Rs 200 Crores.
Below is the Interest rate chart
How the company is doing in terms of Financials?
1) Below are the details profit after tax
- Year ended Mar-2010 – Rs 240 Lakhs
- Year ended Mar-2011 – Rs 2006 Lakhs
- Year ended Mar-2012 – Rs 3861 Lakhs
- Year ended Mar-2013 – Rs 3928 Lakhs
- Year ended Mar-2014 – Rs 2644 Lakhs
2) Non Performing Assets (NPA) of the company is 0.31% for FY2012-13 Vs 0.17% in FY2013-14
Why to invest?
- 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 are reduced compared to previous year.
- It offers secured 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 delay. Hence it is relatively safe to invest in such secured NCD’s.
- Attractive interest rates of 13%. 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.
Why not to invest?
- CARE rated these NCD’s as BBB- (triple B minus) comparing to earlier 6 months back rating of “CARE-BB+” which indicates downgrading of rating.
- Company has been subject to RBI inspection (RBI letter dated Jun-2014) and any adverse action taken could affect our business and operation
- Two of the promoter directors are subject to legal proceedings and any negative things could impact company performance.
- Certain provisions of the RBI circular dated June 27, 2013 read with clarifications dated July 02, 2013 pertaining to ‘raising money through private placement by NBFCs-Non convertible Debentures’ may not have been entirely complied by us in respect of the subordinated debt issued by our Company. We cannot assure that any adverse action would not be initiated by RBI or any other regulatory authorities.
- One of the group company is in similar business and they may have a conflict of interest.
- Company is not able to trace certain records which include equity shares allotted prior to Aug-2004.
- 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 business and financial condition of the company.
- In case of decline in profits of the company, there could be a delay in interest payment and repayment of principal invested.
You can download the prospectus of Kosamattam Finance Oct-2014 NCD here
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
Conclusion: Kosammatam Finance offers good interest rates. However decline in profits and negative CARE credit rating is a concern. High risk investors can invest in Secured NCD’s upto 39 months tenure, after considering negative factors indicated above. Personally, I would not be investing in such high risk NCD’s.
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Kosamattam Finance NCD-Oct-2014 (Secured+Unsecured)