10.4% Manappuram Finance NCD Oct 2018 – Should you invest?

Manappuram Finance NCD Oct 2018 ReviewManappuram Finance NCD Oct 2018 Review


Manappuram Finance NCD Issue would open for subscription on 24th October, 2018. Manappuram Finance NCD offers up to 10.4% interest rates. These are Secured NCDs. When interest rates are low, high interest rate NCDs from Manappuram Finance would definitely attract investors who want to invest for short term to medium term. However, recent IL&FS Crisis has created uncertainty about such bonds. Should you invest in Manappuram Finance NCD Oct 2018? What are the risk factors one should consider before investing in such high risk NCDs?

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About Manappuram Finance Limited


They are one of the major NBFC players in the gold finance business in India. They provide loans against the pledge of household and/or used gold jewelry and provide short-term personal and business gold loans primarily to retail customers who require immediate availability of funds, but who do not have access to formal credit on an immediate basis. Its Gold Loan portfolio as of March 31, 2018 comprised approximately 2.25 million customers aggregating a principal amount of ₹ 117,349.82 million in Gold Loans, which accounted for 76.21% of its total loans on a consolidated basis. As of June 30, 2018, they disbursed Gold Loans to customers from a network of 3,331 branches of the company in 28 states and union territories of India, including 2,236 branches in the southern states of Andhra Pradesh, Telangana, Karnataka, Kerala and Tamil Nadu.

What are NCD Bonds?


If you want to more about NCD bonds, you can view this video.

Features of Manappuram Finance NCD Oct 2018


Issue start date: 24-Oct-2018

Issue end date: 22-Nov-2018

NCD’s are available in 10 options. It offers NCD for 400 days, 2 years, 3 years, 5 years and 7 years tenure.

Interest rates are between 9.6% to 10.4%.

These are secured NCDs.

Interest payable every month, every year and on a cumulative basis depending on the option chosen by the investor.

The face value of the NCD bond is Rs 1000.

Minimum investment is for the 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.

NRI’s cannot apply to this NCD subscription.

These NCD’s are rated as CARE AA/Stable by CARE Ratings and BWR AA+ Stable by BWR Ratings.

The issue size Rs 1,000 Crores.

Edelweiss Financial Services and AK Capital Services are the Lead managers to the issue.

Shelf Prospectus can be downloaded at this link on BSE

Interest rates for Manappuram Finance NCD Oct 2018


Here are the interest rates and coupon rates on these NCDs.

Manappuram Finance NCD Oct 2018 - Interest Rates

How the NCD issue is allocated to various investors?


1) Retail Portion – 50% of the issue

2) HNI – 30% of the issue

3) Qualified Institutional Portion – 10% of the issue

4) Corporate Portion – 10% of the issue

What are the credit ratings for these NCDs?


The Secured NCDs have been rated by CARE as AA/Stable.

The Secured NCDs have been rated by BWR AA+/Stable.

When Manappuram Finance NCD Oct 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.

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How is the company doing in terms of profits?


One should always assess how the company is generating profits. This would create confidence to investors that their interest would be paid from such profits without any problems. Let us look at the profits of the company now.

Year ended Mar-2016 – Rs 337 Crores

Year ended Mar-2017 – Rs 726 Crores

Year ended Mar-2018 – Rs 700 Crores

Manappuram Finance NCD Oct 2018– How the returns taxed?

For investors who are applying through demat account, there would not be 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?


The company is earning consistent and improving margins in the last 3 years. Its profits were at Rs 337 Crores in FY16 Vs Rs 700 Crores in FY18.

These NCDs offer attractive interest rates where you can get interest rates up to 10.4% per annum.

This is secured NCD issue. 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 Manappuram Finance NCD Oct 2018?


1) IL&FS crisis has created new confusion for investors whether to invest in such finance companies.

2) The company and its Directors are involved in certain legal and other proceedings (including criminal proceedings) in India and may face certain liabilities as a result of the same.

3) The company may not be able to successfully manage and maintain its growth.

4) Volatility in the market price of gold may adversely affect its financial condition, cash flows and results of operations.

5) Its business is subject to various regulatory and legal requirements. Also, future regulatory changes may have a material adverse effect on its business, results of operations and financial condition.

6) Its financial performance is particularly vulnerable to interest rate risk. If the company fails to adequately manage its interest rate risk in the future it could have an adverse effect on its net interest margin, thereby adversely affecting its business, cash flows and financial condition.

7) The company may not be able to realize the full value of its pledged gold, which exposes us to potential loss.

8) Company and its Subsidiaries are subject to periodic inspections from RBI and NHB. Non-compliance with RBI or NHB observations may have a material adverse effect on its and its Subsidiary’s business, financial condition or results of operation.

9) The company received requests for information and show cause notices from RBI and SEBI indicating certain violations of RBI and SEBI norms.

10) Microfinance loans offered by its subsidiary, AML, are unsecured and are susceptible to various operational, credit and political risks which may result in increased levels of NPAs, thereby adversely affecting its business, results of operation and financial condition.

11) The new Bankruptcy Code may affect its rights to recover loans from borrowers.

12) Its subsidiary, MHFL being an HFC, has significant exposure to the real estate sector and any negative events affecting this sector could adversely affect its business and result of operations.

13) Some of its Subsidiaries and Group Companies have incurred losses, which may have an adverse effect on its reputation and business.

14) Other Internal and external factors can be read at the risk factors of the NCD prospectus.

How to apply these Manappuram Finance NCD Oct 2018?

Manappuram Finance NCD Issue Oct 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.

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Should you invest in Manappuram Finance NCD Oct 2018?


One should not forget about IL&FS Crisis which is continuing in the last few months. This has created turbulence in the Indian financial economy. Several mutual fund houses are writing off their money. While stock markets have taken a huge beating, it also impacts the returns from mutual fund schemes. Investing in such NCDs is high risk. Credit rating companies like CRISL or CARE or BWR or IND Rating can change credit rating of companies any time without notice. Fundamentally strong companies can turn to negative performance in just a few quarters. Investors should keep some pointers in mind before investing in such high risk NCDs.

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Suresh

Manappuram Finance NCD Oct 2018 Review

2 comments

  • Ashish Kumar

    Hello Suresh, I want to add one thing. I had applied for mannapuram finance NCD but my broker said that it is only available in ASBA allotment. So they said they can’t purchase on my behalf. I have to purchase on my own from bank and by linking my demat account.

    Thank you.

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