10.47% Muthoottu Mini Financiers NCD Mar 2019 – Should you invest?
Muthoottu Mini Financiers NCD Mar 2019 Review
Muthoottu Mini Financiers NCD for March 2019 would open for subscription on 18th March, 2019. It is issuing secured NCD’s now. The yield is as high as 10.47% per annum and attracting investors now. It is offering NCDs of 480 days, 36 months and 60 months tenure. Currently banks are offering low interest rates between 5% to 8% and investors are looking high interest rate NCD’s. Should you invest in Muthoottu Mini Financiers NCD of March 2019? What are the hidden factors an investor should consider before investing Muthoottu Mini Financiers NCD of 2019? In this article, I would provide some interesting insights about Muthoottu Mini Financiers Ltd NCD.
About Muthoottu Mini Financiers Limited
They are a non-deposit taking systemically important NBFC in the gold loan sector lending money against the pledge of household gold jewelry in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Haryana, Maharashtra, Delhi and Goa and the union territory of Puducherry. They have also recently forayed into microfinance loan segment in financial year 2017 wherein they provide unsecured loans to joint liability group of women customers (minimum of 5 persons) who require funds to carry out their business activities through few of their branches in the state of Kerala. Their Gold Loan portfolio as on September 30, 2018, March 31, 2018, March 31, 2017 and March 31, 2016, comprises of 96.35%, 95.31%, 99.01% and 99.60% of their total loans and advances as on such specific dates. They, as on September 30, 2018, have a network of 767 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Haryana, Maharashtra, Delhi and Goa and the union territory of Puducherry and they employ 2,905 persons in their business operations.
Muthoottu Mini Financiers NCD Mar 2019 Issue details
Muthoottu Mini Financiers is issuing secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 100 Crores with an option to retain another Rs 100 Crores over subscription totaling to Rs 200 Crores. It comes with 6 different options, which contains 480 days, 36 months and 60 months tenure NCDs.
About Muthoottu Mini Financiers Mar 2019 Secured NCD
They are offering secured NCD’s now in March 2019. The NCDs would constitute secured and senior obligations of the Company and shall be first ranking pari passu with the existing secured creditors on all loans and advances/ book debts/ receivables, both present and future of Company equal to the value one time of the debentures outstanding plus interest accrued thereon, and subject to any obligations under applicable statutory and/or regulatory requirements.
Features of Muthoottu Mini Financiers NCD of Mar 2019
Issue start date: 18-March-2019
Issue end date: 16-April-2019
NCD’s are available in 6 different options.
The interest of these NCDs is payable monthly and on maturity.
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.
IND Ratings has rated these NCDs as IND BBB-/Stable which indicate that instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
Vivro Financial Services and Vistra ITCL India are the lead managers for this issue.
Here are the interest rates on the March 2019 NCD’s of Muthoottu Mini Financiers
What is the issue break-up?
Institutional Portion – 10% of the issue
Non Institutional Portion – 40% of the issue
Retail Investors – 50% of the issue
How is the company doing in terms of Financials?
Here are the financials:
1) Its revenues are at Rs 391 Crores in FY2016 to Rs 334 Crores in FY2018. Its revenues for 6 months ended Sep-2018 was Rs 153 Crores.
2) Its profits are at Rs 9.77 Crores in FY2016 to Rs 14.2 Crores in FY2018. Its revenues for 6 months ended Sep-2018 was Rs 11 Crores.
3) Its current gold loan business is around 94% of its overall business for 6 months ended Sep-2018.
3) Gross NPA is at 2% for 6 months ended Sep-2018. Net NPA is at Rs 1.3% for similar period.
Why to invest?
1) This is a Leading NBFC company in India.
2) Attractive interest rates where one can get 10.47% yield.
3) It is issuing secured NCDs which are safe to invest compared to other unsecured NCDs.
Why not to invest in Muthoottu Mini Financiers Mar 2019 NCD?
1) Low credit rating from IND Ratings of IND BBB-/Stable.
2) Its NPA is little high in the NBFC industry.
3) They are in receipt of a show cause notice issued by the RBI. Any adverse action taken against company or penalty imposed on company by the RBI could adversely affect their business and operations.
4) They have been subject to an inspection by the RBI and any adverse action taken could affect their business and operations.
5) They are subject to certain legal proceedings and any adverse decision in such proceedings may have a material adverse effect on their business and results of operations.
6) They do not own the trademark and they have been authorised to use by one of their Group Companies. Termination or withdrawal on unfavtheirable terms of this authorisation to use or any negative impact on the ‘Muthoottu Mini’ brand may adversely affect their business, reputation, goodwill, financial condition and results of operations.
7) Their business is capital intensive and any disruption or restrictions in raising financial restheirces would have a material adverse effect on their liquidity and financial condition.
8) Their financial performance is primarily dependent on interest rate risk. If they are unable to manage interest rate risk in the future it could have an adverse effect on their net interest margin, thereby adversely affecting business and financial condition of company.
9) Volatility in the market price of gold may adversely affect their financial condition, cash flows and results of operations.
10) You can refer all risk factors in the Final prospectus of the company.
How to apply Muthoottu Mini Financiers 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 Muthoottu Mini Financiers Mar 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 Muthoottu Mini Financiers NCD of 2019 would get listed on BSE/BSE?
These Muthoottu Mini Financiers Limited NCDs of March, 2019 would get listed after 6 working days from the date of closure. Means it would get listed approx. On 25th April, 2019 assuming that it would continue till 16th April, 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 Muthoottu Mini Financiers NCD of March 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 Muthoottu Mini Financiers is offering secured NCDs, we are seeing that NBFC companies are delaying the interest payment due to the liquidity crunch in the company. Recently example was DHFL. Do you want to invest in such NCD’s then?
2) These NCD’s are for 480 days, 36 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 beyond 3-5 years, hence you should always invest in short term NCDs. You can look for 480 days or 36 months secured NCDs as these are for short term and they are secured in nature.
3) Muthoottu Mini Financiers NCD offers yield upto 10.47% interest per annum, however is high risk. If you are a high risk taker, investing in some of the large mutual funds may be one of the best investment options that can fetch you around 15% annualised returns.
Conclusion: Muthoottu Mini Financiers 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 480 days or 36 months tenure NCDs. However, you should be willing to take the risks indicated above.
Readers, do you feel these NCDs are worth investing?
If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.
Muthoottu Mini Financiers NCD March 2019 Issue Review