Muthoot Finance NCD Issue – Feb 2019 Issue Review
There is a flood of NCDs even after IL&FS scam and Zee Entertainment group, indicating that there is a delay in honoring commercial papers to mutual fund houses and other vendors. Muthoot Finance NCD Feb 2019 Issue would open for subscription on 14th February, 2019. Muthoot finance has come up with secured NCD’s to the tune of Rs 100 Crores and with an option to retain another Rs 650 Crores over subscription. The yield is as high as 10% per annum. Such high yield is good compared to low interest rates offered by banks. Should you invest in Muthoot Finance NCD’s of Feb-2019 as other fixed income options are offering lowest rates? What are the risk factors one should consider before investing in Muthoot Finance NCD Feb 2019? Let me do Muthoot Finance NCD Review in this article.
About Muthoot Finance Limited
Muthoot Finance is largest gold loan 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.
Details of Muthoot Finance NCD Issue – Feb 2019
Muthoot Finance is issuing secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 100 Crores with an option to retain over subscription of another Rs 650 Crores totaling to Rs 750 Crores. It comes with 8 different options, which contains 24 months to 60 month tenure.
About Muthoot Finance Secured NCDs of 2019
For secured NCD’s the assets are backed up for principal and interest. In case of anything happening to the company and company gets wind-up, investors of NCD would still get their principal investment and interest.
Features of Muthoot Finance NCD Issue – Feb 2019
Issue start date: 14-Feb-2019
Issue end date: 14-Mar-2019
NCD’s are available in 8 different options.
The interest of these NCDs is payable monthly and yearly depending on the NCD option chosen by you.
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 rated these NCDs as AA/Stable and CRISIL rated them as AA/Stable, which indicate that instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations.
Here are the interest rates on the Feb 2019 NCD’s of Muthoot Finance.
What is the issue break-up?
QIB Portion – 20% of the issue
Corporate Portion – 20% of the issue
High Net Worth Individuals – 30% of the issue
Retail Investors – 30% of the issue
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How is the company doing in terms of Financials?
Here are the financials:
1) Its revenues grew from Rs 5,747 Crores in FY 2017 to Rs 6,243 Crores in FY2018.
2) Its profits grew from Rs 1,180 Crores in FY 2017 to Rs 1,720 Crores in FY2018.
3) Its Gross NPA is at 1.9% as of 30th September, 2018.
Why to invest?
1) This is a Leading gold loan company in India.
2) Attractive interest rates where one can get 10% yield per annum.
3) Good credit rating from Crisil and ICRA.
4) It is issuing secured NCDs which are safe to invest compared to other unsecured NCDs.
Why not to invest in Muthoot Finance Feb 2019 NCD?
1) Gold finance companies are riskier. Decline in gold prices (which happened in the last 1-2 years), can pose high risk to such business.
2) Though Muthoot finance is offering secured NCDs, there could be delay in the interest and repayment of principal on maturity.
3) You can refer all risk factors in the Final prospectus of the company.
How to apply Muthoot Finance NCD Issue of 2019?
You can apply these NCDs in demat form only. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. The process of applying NCD would be through ABSA (Your amount would be blocked initially and upon allotment, your amount would be deducted and NCD allotment would be done, else your amount would be unblocked) You can reach out to any of the lead managers websites to know more details on how to apply them.
How Muthoot Finance Feb 2019 NCD are taxed?
Since you need to apply through the demat form only, there would not be any interest on the NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the interest in their income tax returns and pay income tax based on the individual tax bracket.
When this Muthoot Finance NCD of 2019 would get listed on BSE?
These Muthoot Finance Limited NCDs of February/March, 2019 would get listed after 6 working days from the date of closure. Means it would get listed approx. On 22nd March, 2019 assuming that it would continue till 14th March, 2019 i.e. the last date of subscription. If it is subscribed earlier and subscription closes, it would get listed after 6 days from such closure.
Should you invest in Muthoot Finance NCD of Feb 2019?
Refer my earlier articles about NCD’s and you would get the answer. You should ask few questions before you want to invest in these NCDs.
1) Though Muthoot Finance is offering secured NCDs, we are seeing that NBFC companies are delaying the interest payment due to the liquidity crunch in the company. Do you want to invest in such NCD’s then?
2) These NCD’s are for 24 months, 38 months and 60 months tenure. Do you want to park your money in high risk NCD for 5 years? We do not know how the company would perform in 5 years, hence you should always invest in short term NCDs. You can look for 24 months or 38 months secured NCDs as these are for short term and they are secured in nature.
3) Muthoot Finance NCD offers yield up to 10% interest per annum, however is high risk. If you are a high risk taker, investing in some of the low risk and high return mutual funds may be one of the good investment options that can fetch you 12% to 15% annualised returns.
Conclusion: Muthoot Finance NCDs offers high interest rates. Secured NCDs are somewhat better compared to unsecured. If you are a high risk taker and willing to invest in such companies even after IL&FS Scam, you can consider investing in Secured NCDs for 24 months or 38 months. However, you should be willing to take the risks indicated above.
Readers, do you feel these NCDs are worth investing?
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Muthoot Finance NCD Issue – Feb 2019 Review