11.25% Muthoot Finance NCD-Nov/Dec-2014
Muthoot Finance NCD-November/December-2014
Muthoot finance NCD subscription would open on 19th November, 2014. It is issuing secured and un-secured NCD’s in this current issue. The interest rates are as high as 11.25% per annum compared to Aug-14 NCD of 11.50%. I have been providing 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 November/December 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 several NCD’s in the past in the form of secured and unsecured NCD’s.
Muthoot Finance NCD November 2014
Muthoot Finance is issuing secured and un-secured redeemable Non Convertible Debentures (NCD’s) to the tune of 400 Crores. It comes with 11 different options, which contains 400 days to 78 month tenure. Prior to Aug NCD, it had highest tenure of 75 months.
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 November 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 as they would be given preference in payment of money which would be received during winding up.
b) About Muthoot Finance Unsecured NCD’s of November 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 Nov/Dec 2014
- Issue start date: 19-November-2014
- Issue end date: 18-December-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 ICRA AA- which indicates a high degree of safety for payment of principal and interest (Letter dated 31st October, 2014).
- Muthoot Finance NCD prospectus can be downloaded from the BSE website at this link
Here are the interest rates on the November 2014 NCD issue of Muthoot Finance.
How is the company doing in terms of Financials?
- Revenues of the company have declined from Rs 5,387 Crores (FY 2012-13) to Rs 4,947 Crores (FY 2013-14) indicating negative growth of 8%.
- Profits have reduced from Rs 1004.23 Crores (FY 2012-13) to Rs 599.12 Crores (FY 2013-14) indicating a negative growth of 40%.
- Gross Non Performing Assets (NPA) of the company is 1.99% (FY2012-13) Vs 1.90% (FY 2013-14).
Why to invest?
- Largest gold loan financing company
- 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 11.25% per annum
- You can double your money in 78 months (6 years, 3 months)
Why not to invest?
- Revenues are in declining mode.
- Profits are shrinking. It has seen 40% negative growth. Reduction in profits can lead to delay in interest payment. July-September quarter of 2014, net profit declined 19 percent to Rs 170.7 crore versus Rs 211 crore, YoY.
- Increase in NPA’s in the last 2 years is a major concern.
- Gold finance companies are riskier. Decline in gold prices (which happened last year), can pose high risk to such business.
- There are other good rated NCD’s offering high interest rates, which you can buy in the open market.
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. My view has is negative on this company NCD’s. Reducing profits in the last few quarters poses high risk and this could delay your interest payments. High risk takers can invest in the secured NCD considering the negative points and risk factors indicated above.
Readers, are you investing in any these NCD’s these days? Are you getting timely payment of interest ? Would love to hear your experiences.
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Muthoot Finance NCD-Nov/Dec-2014