10% Muthoot Vehicle & Asset Finance NCD Feb 2020 – Issue Details, Risks and Interest Rates
Muthoot Vehicle & Asset Finance NCD Feb 2020 Review
Muthoot Vehicle & Asset Finance NCD would open for subscription on 25th February, 2020. Muthoot Vehicle & Asset Finance have been a deposit-taking company operating primarily in the State of Kerala. It is issuing secured NCD’s. The yield is as high as 10% per annum and attracting investors now. It is offering NCDs of 24 months, 38 months, 60 months and 90 months. Your money would get doubled in 7.5 years. Should you invest in Muthoot Vehicle & Asset Finance NCD of February 2020? What are the risk factors an investor should consider before investing Muthoot Vehicle & Asset Finance NCD of 2020?
What are Non Convertible Debentures (NCDs)?
If you want to more about NCD bonds, you can view this video.
About Muthoot Vehicle & Asset Finance Limited
They have been a deposit-taking vehicle and asset finance company operating primarily in the State of Kerala registered with the RBI as a NBFC- D. They have, recently, been re-classified as an NBFC – Investment and Credit Company pursuant to the RBI’s recent directive. They are in the business of granting loans against the security of vehicles and assets predominantly in Kerala and also operate in Coimbatore. They are part of the Muthoot Group and were incorporated as for undertaking hire-purchase operation. They have over the years transformed its business and they are, presently, a multi-category loan portfolio company.
Muthoot Vehicle & Asset Finance NCD February 2020 Issue details
Muthoot Vehicle & Asset Finance Limited 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 10 different options, which has 24 months, 38 months, 60 months and 90 months tenure NCDs.
What does Secured NCDs mean?
The principal amount of the Secured NCDs to be issued in terms of this Prospectus together with all interest due on the Secured NCDs, as well as all costs, charges, all fees, remuneration of Debenture Trustee and expenses payable in respect thereof shall be secured by way of first ranking pari passu charge with Existing Secured Creditors, on current assets, including book debts, loans and advances, cash and bank balances (not including reserves created in accordance with law) and receivables, both present and future of the Company.
Muthoot Vehicle & Asset Finance NCD of Feb-20 issue details
Issue start date: 25-February-2020
Issue end date: 18-March-2020
NCD’s are available in 10 different options.
The interest options in these NCDs is to pay interest either monthly, annually and at maturity based on the option chosen.
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.
CRISIL rated these NCDs as A/stable. The rating by CRISIL indicates that the instruments are considered to have adequate degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk.
CARE rated them as BBB+/Stable. The rating by CARE indicated that the instruments are considered to have a moderate degree of safety regarding timely servicing of financial obligations. CARE ratings has been withdrawn in Jan-2020.
ING Ventures are the lead managers for this issue.
Interest rates – Muthoot Vehicle & Asset Finance NCDs in 2020
What is the issue break-up?
Institutional Portion – 10%
Non Institutional Portion – 40%
Retail Investors – 50%
How is the company doing in terms of Financials?
Here are the financials:
1) Its revenues increased from Rs 32.84 Crores for the period ended Sep-18 to Rs 35.53 Crores for the period ended Sep-19.
2) Its profits dropped from Rs 4.51 Crores for the period ended Sep-18 to Rs 1.64 Crores for the period ended Sep-19.
Why to invest in Muthoot Vehicle & Asset Finance Ltd NCD?
1) Attractive interest rates where one can get yield up to 10%.
2) It is issuing secured NCDs which are safe to invest compared to other unsecured NCDs.
What are the objectives of the offer?
These objectives would help investors to know where the company would spend your money.
1) For the purpose of onward lending and for repayment of interest and principal existing loans.
2) General Corporate purpose.
Why not to invest in Muthoot Vehicle & Asset Finance February 2020 NCD?
1) It has low credit rating from CRISIL and CARE. Even the rating has been withdrawn by CARE Ratings Limited, vide letter dated January 24, 2020.
2) Its business is subject to defaults in payment by its customers which could expose us to a potential loss, thereby adversely affect its financial condition and results of operations and an inability to manage the level of non-performing assets in the loan portfolio could adversely impact its profitability.
3) The value of the collateral security may depreciate over time which in the event of default could adversely affect its financial performance and its results of operation.
4) Inability to foreclose on collateral in the event of a default may result in failure to recover the expected value of the collateral. Additionally, the value of the collateral on loans may decrease, or its Company may experience delays in enforcing collateral when borrowers default on their obligations.
5) Its business is heavily dependent on access to working capital funds. Any failure to obtain working capital funding on commercially acceptable terms could have an adverse impact on Its business and financial condition.
6) They may face maturity mismatches between its assets and liabilities in the future, which may cause liquidity issues.
7) If they fail to identify, monitor and manage risks and effectively implement its risk management policies, it could have a material adverse effect on its business, financial condition, results of operations and cash flows.
7) You can refer all risk factors in the final prospectus of the company.
How to apply Muthoot Vehicle & Asset Finance NCD Issue of 2020?
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 ASBA (Your amount would be blocked initially and upon allotment, your amount would be deducted and NCD unit 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 Vehicle & Asset Finance February 2020 NCD interest is taxed?
Since you need to apply through the demat form only, there would not be any TDS deduction on the interest paid on these NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the NCD interest as income in their income tax returns and pay income tax based on the individual tax bracket.
When these Muthoot Vehicle & Asset Finance NCD’s of 2020 would get listed on BSE?
These Muthoot Vehicle & Asset Finance Limited NCDs of February, 2020 would get listed after 6 working days from the date of closure.
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Should you invest in Muthoot Vehicle & Asset Finance NCD of February 2020?
These NCDs are secured in nature and offer high interest rates. However, its profits are in declining mode. Company can pay interest on time, if they generate profits, else there could be delay in payment. Its credit ratings are low. CARE has withdrawn its ratings last month in Jan-2020. Considering these factors, investors should stay away from such high risk NCDs and subscribe to high credit rating NCDs that may come in future.
Alternatively, you can invest in a small portfolio of mutual fund schemes that can generate higher returns though not guaranteed.
Readers, do you feel these NCDs are worth investing?
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Muthoot Vehicle & Asset Finance NCD February 2020 Review