Muthoot Finance NCD Bonds – Sep/Oct-2015
Muthoot Finance NCD Bonds of Sep/Oct-21015 has opened for Subscription couple of days back. Company is issuing secured and un-secured NCD’s in this current issue of Sep/Oct-2015. The effective yield rate of these Non-Convertible Debentures (NCD) is as high as 10.41% per annum. 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. What are the positive factors of these NCD Bonds? What are its hidden factors? Should you invest in Muthoot Finance NCD of September/October-2015?
About Muthoot Finance Limited
Muthoot Finance is largest gold loan Non Banking Finance 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 Bonds Sep/Oct-2015
Muthoot Finance is issuing secured and un-secured redeemable Non Convertible Debentures (NCD’s) to the tune of 250 Crores with an option to retain over subscription for another Rs 250 Crores aggregating to total of Rs 500 Crores. These NCD Bonds comes with 11 different options, which contains 400 days to 84 month tenure. Earlier issue of NCD, it had highest tenure of 81 months.
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 Sep/Oct-2015
For secured NCD’s the assets are backed up for principal and interest. In case of unforsene thing happening to the company performance and company would wind-up, investors of NCD would still get their principal investment and interest.
b) About Muthoot Finance Unsecured NCD’s of Sep/Oct-2015
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. It would be after repayment to other secured creditors / vendors.
Features of Muthoot Finance NCD of Sep/Oct-2015
- Issue start date: 7-Sep-2015
- Issue end date: 7-Oct-2015
- 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 10th August, 2015)
- The prospectus can be downloaded from the SEBI website at this link
Here are the interest rates on the Sep/Oct-2015 NCD’s of Muthoot Finance
How is the company doing in terms of Financials?
- Revenues of the company have declined from Rs 4,947.43 Crores (FY 2013-14) to Rs 4,324.63 Crores (FY 2014-15) indicating negative growth of 12.6%.
- Profits have reduced from Rs 780.06 Crores (FY 2013-14) to Rs 670.5 Crores (FY 2014-15) indicating a negative growth of 14%.
- Gross Non Performing Assets (NPA) of the company is 1.90% (FY2013-14) Vs 2.19% (FY 2014-15).
Why to invest?
- Largest gold loan NBFC Company
- It offers secure NCD’s also where your money is safe. For secured NCD’s the assets are backed up for principal and interest. In case of unforsene thing happening to the company performance and company would wind-up, investors of NCD would still get their principal investment and interest
- Attractive yield of 9.75% to 10.41% per annum
- You can double your money in 84 months (7 years)
Why not to invest?
- Revenues are in declining mode.
- Profits are shrinking. It has seen 14% negative growth. Reduction in profits can lead to delay in interest payment.
- Increase in NPA’s in the last 3 years is a major concern.
- Gold NBFC companies are riskier. Decline in gold prices (which is happening in last few years), 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. Reducing profits in the last few years poses high risk and this could delay your interest payments. High risk takers can invest in the secured NCD (Option I to X only) considering the positive, negative points and risk factors indicated above.
Readers, are you investing in any NCD’s these days? What are your experiences on this?
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Muthoot Finance NCD Bonds – Sep/Oct-2015