12.25% KLM Axiva Finvest NCD Sep 2018 – Invest or Avoid?
KLM Axiva Finvest NCD Sep 2018 Review
KLM Axiva Finvest NCD Issue has opened for subscription on 27th September, 2018. KLM Axiva Finvest NCD interest rates are up to 12% and yield works out up to 12.25%. They are offering secured NCDs. KLM Axiva Finvest NCDs are offered for 1,3, 5 and 6 year tenure. We would not even heard about this company name in the past, hence it would be big question whether to invest in such company NCDs are not. Should you invest in KLM Axiva Finvest NCD Sep/Oct 2018? What are the risk factors one should consider before investing in such high risk NCDs?
About KLM Axiva Finvest Limited
They are a non-deposit taking and non-systemically important non-banking finance company primarily serving low and middle income individuals and businesses that have limited or no access to formal banking and finance channels. They operate primarily in three business verticals:
(i) Gold loan business, lending money against the pledge of household, jewelry,
(ii) Micro, small and medium enterprises loan, and
(iii) personal loan. Further, as a part of its offerings, they also provide micro finance loans to women customers and vehicle loan. As of August 31, 2018, they operate through 79 branches across three states, namely Kerala, Karnataka and Tamil Nadu managed by its corporate office located in Kochi.
Features of KLM Axiva Finvest NCD Sep 2018
Issue start date: 27-Sep-2018
Issue end date: 26-Oct-2018
NCD’s are available in 9 series/options. It offers NCD for 1 year, 3 years, 5 years and 6 year tenure.
Coupon interest rates are between 11.25% to 12%.
Yield comes to 12.25% for these NCDs.
These are Secured Redeemable NCDs.
Interest payable monthly, yearly and on maturity depending on the option chosen by the NCD investor.
The face value of the NCD bond is Rs 1000.
Minimum investment is for the 5 bonds. Means, you need to invest for a minimum of Rs 5,000. Beyond this you can invest in multiples of 1 bond.
These NCD bonds would be listed on BSE. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
The base issue size is Rs 100 Crores.
Vivro Financial Services is the lead manager for the issue.
Interest rates of KLM Axiva Finvest NCD Sep 2018
How the NCD issue is allocated to various investors?
1) Institutional Portion – 10% of the issue
2) Non Institutional Portion – 40% of the issue
3) Retail Portion – 50% of the issue
What are the credit ratings for these NCDs?
The Secured NCDs have been rated by CARE as CARE BB/ Outlook Stable.
The rating of NCDs by CARE indicates that instruments with this rating are considered to have a moderate risk of default regarding timely servicing of financial obligations.
How KLM Axiva Finvest NCDs are secured?
The NCDs would constitute secured obligations of the company and shall rank pari passu with the Existing Secured Creditors on all movable assets and fixed 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 Theni District, Periyakulam Reg. Dt., Thevaram SRO, Uthampalyam Taluk, Kombai Village, Malligai Nagar, Plot No. 10 in Survey No. 595/1.
When KLM Axiva Finvest NCD Sep 2018 is proposed to be listed on stock exchanges?
The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 12 Working Days from the date of the Issue Closure.
How is the company doing in terms of profits?
Its standalone profits are as below:
Year ended Mar-2016 – Rs 164 Lakhs
Year ended Mar-2017 – Rs 213 Lakhs
Year ended Mar-2018 – Rs 568 Lakhs
KLM Axiva Finvest NCD Sep 2018 – How the returns taxed?
For investors who are applying through demat account, there would not be any TDS deduction.
Income tax on interest would be based on individual tax slab. Means, irrespective of whether company deducts TDS or not, you should show the interest income on your income tax return and pay necessary income tax.
Why to invest?
1) The company is earning consistent and improving margins in the last few years. This indicates that this company has ability to consistently pay the interest rates for its creditors or NCD holders.
3) These NCDs offer attractive interest rates where you can get yield up to 12.25% per annum.
4) It issues Secured NCDs. In case of any non performance of the company and the company gets closed for some reason, NCD investors would get preference in repayment of capital along with interest. Hence it is safe to invest in such secured NCD options. However, it is only preference is given to NCD investors and no guarantee that entire amount would be paid-back in such cases.
Why not to invest in KLM Axiva Finvest NCD Sep 2018?
1) Company NPA is high. Its Net NPA was 5.9% for FY2016, 3.78% for FY2017 and 3.94% for FY2018.
2) Company, its Promoter and Directors and its Group companies have been subject to search and seizure operations conducted by the Indian income tax authorities.
3) Its financial performance is particularly vulnerable to interest rate volatility. If they are unable to manage interest rate risk in the future it could have an adverse effect on its net interest margin, thereby adversely affecting business and financial condition of company.
4) Its business requires substantial capital, and any disruption in funding sitsces would have a material adverse effect on its liquidity and financial condition.
5) High levels of customer defaults or delays in repayment of loans could adversely affect its business, financial condition and results of operations.
6) If they are unable to manage the level of NPAs in its Loan Assets, its financial position and results of operations may suffer.
7) One of its Group Company, Payyoli Granites Private Limited had loss after tax for Fiscal 2014-15.
8) They have received Show-Cause Notice from RBI and any adverse action taken could affect its business and operations.
9) Other Internal and external factors can be read at the risk factors of the NCD prospectus.
How to apply these KLM Axiva Finvest NCD Sep 2018?
KLM Axiva Finvest NCD Issue of September 2018 is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. For more information on this you can refer prospectus.
Should you invest in KLM Axiva Finvest NCD of 2018?
KLM Axiva Finvest is offering Secured NCDs and offers up to 12% interest rates and 12.25% yield. However, it has low credit rating of CARE BB. Since it offers secured NCDs, there is some security for your investment, however the risk is still not eliminated. One should not forget about the recent share prices crash of housing companies where there is a question mark about such company's performance. If you are a very high risk investor, you can try investing in such high risk NCDs, otherwise you should invest in high rated NCDs. Investors should avoid investing in long term NCDs as we do not know how the company would perform in the long run and such NCD’s may turn to be high risk in the future.
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KLM Axiva Finvest NCD Sep 2018 Review