Kosamattam Finance Secured / Un-Secured NCD-Feb/Mar-2015
After 4 months, Kosamattam Finance is again offering NCD’s, where interest rates are up to 13% and yield works out to be 13.8% for 70 months tenure NCD. This Non Banking Finance Company is operating from Kerala and has a presence across South India. How is current Kosamattam Finance NCD of Feb/Mar-2015? What are the positive features of this NCD? Do you know that this company margins are dropping drastically and it is very high risk ? I am reviewing Kosamattam Finance NCD's of current issue in this article.
About Kosamattam Finance Limited
Kosamattam Finance Limited 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-February-2015
- Issue start date: 10-February-2015
- Issue end date: 11-March-2015
- NCD’s are available for 400 days, 18 months, 36 months, 40 months and 70 months tenure.
- It offers monthly and cumulative options.
- It offers both secured and un-secured NCD’s. Secured NCD’s are for 400 days, 18 months, 36 months, 40 months and 70 months. Unsecured NCD’s have been offered for 70 months cumulative interest option 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 of profit after tax (PAT) of Kosamattam Finance Limited.
- 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 2,644 Lakhs
- Period ended Nov-2014 (8 months) – Rs 365 Lakhs
2) Gross Non Performing Assets (NPA) of the company is 0.31% for FY2012-13 Vs 0.17% in FY2013-14. For the period ending Nov-2014, it is 0.91%.
Why to invest?
- It offers secured NCD’s which are secured by movable assets, including book debts, receivables, etc. Means in case of any wind-up of company due to bad performance of 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 12.5%. You can double your money in 70 months. Senior Citizens would get additional 0.5% more. However, they need complete KYC norms to get additional interest.
- Company is showing good growth in interest income in the last few years.
Why not to invest?
- Company has been earning good profits in the last 5 years. However profits are in declining mode. In 8 months ended it earned just Rs 365 Lakhs as against Rs 2,644 Lakhs for the previous financial year.
- CARE rated these NCD’s as BBB- (triple B minus) comparing to last year back rating of “CARE-BB+”.
- 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.
- Complete risk factors of Kosamattam Finance NCD of February, 2015 can be read in prospectus.
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 declining profits and negative CARE credit rating is a concern. High risk investors who are willing to take the risk can invest by considering all the negative risk factors. I would advise moderate risk and low risk investors to stay away from such NCD’s as of now.
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Kosamattam Finance Secured / Un-Secured NCD-Feb/Mar-2015
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