10.65% Manappuram Home Finance NCD Sep 2019 Issue Review

Manappuram Home Finance NCD Sep 2019 ReviewManappuram Home Finance NCD Sep 2019 Issue Review


There are a bunch of NCD Public issues that are lined up now. One among is Manappuram Home Finance Secured NCDs. Manappuram Home Finance NCD Issue would open for subscription on 30th September, 2019. The Manappuram Home Finance NCD offers up to 10.65% interest rates. Your money would get doubled in 2,500 days / 6 years 10 months. When interest rates are low, high interest rate NCDs from Manappuram Home Finance would definitely attract investors who want to invest for short term to medium term. Should you invest in Manappuram Home Finance NCD Sep 2019? What are the risk factors one should consider before investing in such high risk NCDs?

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About Manappuram Home Finance Limited


They are a non-deposit taking Housing Finance Company, registered with the National Housing Bank are a wholly owned subsidiary of Manappuram Finance Limited. They are focused on providing affordable housing finance for the EWS, LIG and MIG segment primarily in Tier II and Tier III cities and towns in India. They offer two products namely Home Loan and Loan Against Property. They provide secured finance primarily to individual customers with focus on self-employed (professionals & nonprofessional) and salaried (informal segment) for purchase, self-construction, improvement and extension of homes, new and resalable flats, balance transfer of existing loans, commercial properties (purchase/ LAP) and composite loan (land and construction). Its customer base consists of 6,184 customers and its total assets under management was Rs 51,875.81 lakhs, as on March 31, 2019.

What are NCD Bonds?


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

Features of Manappuram Home Finance NCD Sep 2019


Issue start date: 30-Sep-19

Issue end date: 29-Oct-2019. However, based on over subscription it can get close before that.

These NCD’s are available in 7 options. It offers NCD for 3 years, 5 years and 6 years 10 months approx. (2,500 days).

Interest rates are between 9.75% to 10.65%.  Yield works out between 10% to 10.65%.

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.

The NCD issue size Rs 100 Crores with an option to retain another Rs 100 Crores totaling to Rs 200 Crores.

Vivro Financial Services are the Lead managers to the issue.

NCD Prospectus can be downloaded at this link on BSE.

Interest rates for Manappuram Home Finance NCD Sep 2019


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

Manappuram Home Finance NCD Sep 2019 Interest Rates

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

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What are the credit ratings for these NCDs?


The Secured NCDs have been rated by CARE as AA- Stable (AA minus outlook stable). The rating of NCDs from CARE Ratings indicates that instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

How the Manappuram Home Finance NCDs of Sep 2019 are secured?


The principal amount of NCDs to be issued in terms of this Prospectus together with all interest due on the NCDs, as well as costs, charges, all fees, remuneration of Debenture Trustee and expenses payable in respect thereof shall be secured by way of first charge ranking pari passu with existing secured creditors, on all loans and advances, book debts, current assets, other receivables (both present and future) of the Company, equal to the value of one time of the NCDs outstanding plus interest accrued thereon and by way of first charge on the immovable property being land admeasuring an extent of 877 sq.ft. together with building measuring an extent of 180 sq. ft. of built-up area, situated at Door No. 124, Comprised in  7 Term Description Survey No. 348/3C1, as per Patta Bearing No. 625, New Survey No. 348/17, at No 78, Anupampattu, 2 Village, (Old No 80, Elavambedu Village), Ponneri Taluk, Thiruvallur District, 601203, Tamil Nadu.

When Manappuram Home Finance NCD Sep 2019 is proposed to be listed on stock exchanges?


The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 6 Working Days from the date of the Issue Closure.

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 / Loss of the company now.

Year ended Mar-2018 – Loss of Rs 4.45 Crores

Year ended Mar-2019 – Profit of Rs 3.02 Crores

Manappuram Home Finance NCD Sep 2019 – How the returns taxed?


Since the investors would be applying these NCDs 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 based on your income tax slab.

Why to invest?


1) These NCDs offer attractive interest rates where you can get interest rates up to 10.65% per annum.

3) 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 Home Finance NCD Sep 2019?


1) Its business is particularly vulnerable to volatility in interest rates.

2) Any increase in the levels of NPAs in its loan portfolio, for any reason whatsoever, would adversely affect its business, results of operations and financial condition.

3) They have incurred losses for the fiscal 2015, 2016, 2017 and 2018. Any losses in the future may have a significant adverse impact on its financial condition and may lead to further erosion of its net worth.

4) They may face maturity mismatches between its assets and liabilities in the future, which may cause liquidity issues.

5) Its indebtedness and conditions and restrictions imposed by its financing arrangements could adversely affect its ability to conduct its business and operations.

6) In order to sustain its growth, they will need to maintain a minimum capital adequacy ratio. There is no assurance that they will be able to raise capital when necessary in order to maintain such a ratio

7) As an HFC, they face the risk of default and non-payment by borrowers and other counter parties. Any such defaults and non-payments would result in write-offs and/or provisions in its financial statements which may have a material adverse effect on its profitability and asset quality.

8) Its revenue from operations has grown consistently in the past. Any inability to maintain its growth may have a material adverse effect on its business, results of operations and financial condition.

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

How to apply these Manappuram Home Finance NCD Sep 2019?


Manappuram Home Finance NCD Issue Sep 2019 is available in only in demat form. You can apply online or through any of the leading demat broker 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 Home Finance NCD Sep 2019?


Manappuram Home Finance is offering Secured NCDs that offers high interest rates up to 10.65%. Banks are reducing the interest rates month on month and the interest rates are between 6% to 8% per annum. This company credit rating is also good. However, this company has incurred losses from FY2015 to FY2018 for 4 years. One should avoid investing in loss making companies as such companies can delay in payments (as interest payment would be generally made from profits). One should also note about the current NBFC crisis. Your interest payment or repayment of capital might get delayed if you are investing in NBFC companies now. If you are okay with the risk factors indicated above, you can invest in these NCDs, otherwise, you can skip these NCDs as of now.

Readers, what do you think about these NCDs of Manappuram Home Finance Limited?

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Suresh

Manappuram Home Finance NCD Sep 2019 Review

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