10.47% Kosamattam Finance NCD-Mar/Apr-2017 – Should you invest?
After long time, Kosamattam Finance is again offering NCD’s, where interest rates are up to 10% and yield works out to be 10.47% for 60 months tenure NCD. This Non Banking Finance Company is operating from Kerala and has a presence across South India. Should you invest in Kosamattam Finance NCD of Mar/April-2017? What are the positive features of this Kosamattam Finance Apr-2017 NCD? What are the risk factors you should consider before investing in such NCD’s.
About Kosamattam Finance Limited
They are a systemically important non-deposit taking NBFC primarily engaged in the Gold Loan business, lending money against the pledge of household Jewellery (“Gold Loans”) in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry. As on January 31, 2017 they had a network of 960 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry and they employ 3,153 persons in its business operations.
Features of Kosamattam Finance Secured NCD-Mar/April-2017
- Start date: 29-Mar-2017
- End date: 27-April-2017
- NCD’s are available for 400 days, 18 months, 36 months, 52 months, 60 months and 86 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, 52 month and 60 months. Unsecured NCD’s have been offered for 86 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 125 Crores with an option to retain another 125 Crores aggregating to Rs 250 Crores.
Below is the Interest rate chart
How the company is doing in terms of Financials?
- It earned revenues of Rs 342 Crores for FY16 compared to Rs 255 Crores for FY15. For 6 months ended Sep-2016 its revenues are Rs 163 Crores Vs 169 Crores in previous year 6 months ended Sep-15.
- Its profits are Rs 11 Crores for FY16 compared to FY15 profits of Rs 5.28 Crores. Even is 6 months ended Sep-16, its profits are at Rs 7.11 Crores compared to previous year 6 months profits of Rs 5.5 Crores.
- Gross Non Performing Assets (NPA) of the company is 0.55% for 6 months ended Sep-2016 which is high compared to FY16 and FY15 financial years.
Why to invest?
- It offers secured NCD’s which are secured by movable assets, including book debts, receivables, etc. Means in case company gets wind-up 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 10%. You can double your money in 86 months.
- Company is earning good growth in interest income in the last few years.
Why not to invest?
- India Rating agency has rated these bonds as INDRA BBB- Outlook Stable. Such low credit rating NCD’s are high risk.
- They have been subject to RBI inspection and any adverse action taken could affect its business and operations.
- They may be subject to regulatory action with regards to adequacy of its debenture redemption reserve.
- They have received a letter dated February 10, 2014 from the RBI inter-alia alleging noncompliance with RBI.
- Company, two of its Promoter Directors and one of its Group Company are subject to certain legal proceedings and any adverse decision in such proceedings may have a material adverse effect on its business, financial condition and results of operations.
- Complete risk factors of Kosamattam Finance NCD of Mar/April-2017 can be read at risk factors indicated in prospectus.
- You can download the prospectus of Kosamattam Finance Mar/April-2017 NCD here
How to invest?
You can login to your demat account and apply under IPO/NCD section. In case you want to apply in physical form, the process is indicated in the prospectus.
Conclusion: Kosammatam Finance offers good interest rates. While its financial are okay, its low 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 NCD-Mar-Apr-2017 – Should you invest