Kosamattam Finance NCD – Dec 2017 – Should you invest?
After 4 months, Kosamattam Finance is again coming up with NCD subcription now. Kosamattam Finance NCD opened for subscription on 1st December, 2017. These NCDs offer interest rates up to 10% and provides high yield upto 10.47%. This Non Banking Finance Company is operating from Kerala and has a presence across South India. In these NCDs, your money would get doubled in 88 months compared to Banks where your money would get doubled in more than 105 months. Should you invest in Kosamattam Finance NCD of December-2017? What are the positive features of Kosamattam Finance December-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 in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry. As on June 30, 2017, they had a network of 888 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 employ 2,912 persons in its business operations. They belong to the Kosamattam Group led by Mr. Mathew K. Cherian. They are headquartered in Kottayam in the state of Kerala.
Features of Kosamattam Finance NCD – December 2017
Kosamattam Finance is offering Secured, Redeemable Non Convertible Debentures as well as unsecured NCDs now in December, 2017. Here are the features of these NCDs.
- Start date: 1-Dec-2017
- End date: 29-Dec-2017
- It offers secured and unsecured NCDs.
- Thse NCD’s have monthly and cumulative options.
- It offers both secured NCD’s for 400 days, 18 months, 36 months, 52 months and for 88 months tenure.
- 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 115 Crores with an option to retain another Rs 115 Crores aggregating to Rs 230 Crores.
- VIVRO Financial Services Private Limited is the Book Running lead Manager for this issue.
- You can download the prospectus of Kosamattam Finance December-2017 NCD here
Below is the Interest rate chart of Kosamattam Finance NCD Dec 2017
How the company is doing in terms of Financials?
1) It earned revenues of Rs 345.7 Crores for FY16 and Rs 352.2 Crores for FY17.
2) Its profits are Rs 11.22 Crores for FY16 and Rs 15.68 Crores for FY17.
3) Net Non Performing Assets (NPA) are at 0.2% in FY16 and 0.21% in FY17.
How ranking of NCD’s done?
The NCDs would constitute secured obligations of Company and shall rank pari passu with the Existing Secured Creditors on all movable assets, including book debts and receivables, cash and bank balances, loans and advances both present and future of the Company equal to the value 1 time of the debentures outstanding plus interest accrued thereon and first ranking pari passu charge on the immovable property situated at Nagappattinam Dist. Kelvelur Taluk, Velankanni Village, Tamil Nadu. The NCDs proposed to be issued under the Issue and all earlier issues of debentures outstanding in the books of the Company having corresponding assets as security, shall rank pari passu without preference of one over the other except that priority for payment shall be as per applicable date of redemption. Company confirms that all permissions and/or consents for creation of a pari passu charge on the current assets, book debts, loans and advances, and receivables, both present and future as stated above, have been obtained from all relevant creditors, lenders and debenture trustees of the Company, who have an existing charge over the above-mentioned assets.
Why to invest?
1) It offers secured and unsecured NCDs. secured NCD’s 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. Investors can stay away from unsecured NCDs.
2) Attractive interest rates of 10%. You can double your money in 88 months.
3) Company is earning good growth in interest income in the last few years.
Why not to invest?
1) It offers unsecured NCDs which are very very high risk. If the company goes bankrupt for some reason, investors of unsecured NCDs would be given preference like any other creditor and would be given normal preference in repayment of capital or interest of the company.
2) India Rating agency has rated these bonds as INDRA BBB- Outlook Stable. The rating of NCDs by India Ratings indicates that instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such low credit rating NCD’s are high risk.
3) Restrictive or penal order may be passed against us by the RBI in on-going and / or future proceedings that could hamper its operations or services, or a part thereof, or levy penalties in connection therewith, which may in turn adversely affect its operations and profitability.
4) They have been subject to an inspection by the RBI and any adverse action taken could affect its business and operations.
5) They are subject to inspections by CDSL in its capacity as a depository participant and any adverse action taken by CDSL could affect its business and operations.
6) Its ability to access capital also depends on its credit ratings. Any downgrade in its credit ratings would increase borrowing costs and constrain its access to capital and lending markets and, thus, would negatively affect its net interest margin and its business.
7) Company, two of its Promoter Directors and one of its Group Companies are subject to certai legal proceedings and any adverse decision in such proceedings may have a material adverse effect of its business, financial condition and results of operations.
8) One of its Group Companies is enabled by its memorandum of association to undertake activities similar to the activities conducted by its Company which may be a potential sitsce of conflict of interest for them and which may have an adverse effect on its operations.
9) Company was unable to trace certain secretarial records, including records pertaining to the allotment of Equity Shares acquired by its past shareholders prior to August 2004.
10) A major part of its branch network is concentrated in southern India and they derive majority of its revenue from southern India. Any breakdown of services in these areas could have a material and adverse effect on its results of operations and financial conditions.
11) Its business is capital intensive and any disruption or restrictions in raising financial resources would have a material adverse effect on its liquidity and financial condition.
12) They have had negative net cash flows from its operating, investing and financing activities in the recent fiscal years. Any negative cash flows in the future may adversely affect its results of operations and financial condition.
13) Complete risk factors of Kosamattam Finance NCD of December-2017 can be read at risk factors indicated in prospectus.
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. These NCDs would get listed within 12 days from the closure of the NCD subscription.
Conclusion: Kosammatam Finance offers good interest rates. While its financials are okay, its low credit rating is a concern. High risk investors who are willing to take the risk can invest in secured NCDs 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 – December 2017 – Should you invest