Kosamattam Finance NCD March 2020 Review
Kosamattam Finance NCD would open for subscription on 19th March, 2020. These NCDs offer interest rates up to 10.25% and provides high yield up to 10.75%. This Non Banking Finance Company is operating from Kerala and has a presence across South India. In these NCDs, your investment would get doubled in 84 months compared to Banks where your money would get doubled in more than 100 months. What are the risk factors you should consider before investing in such NCD’s? Should you invest in Kosamattam Finance NCD of Mar 2020?
About Kosamattam Finance Limited
They are a systemically important non-deposit taking NBFC primarily engaged in the Gold Loan business, lending money against the pledge of household Jewellery in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry.
Issue details of Kosamattam Finance NCD – Mar 2020
Here are the issue details of these NCDs.
Start date: 19-Mar 2020
End date: 15-April-2020
It offers secure NCDs as well as unsecured NCDs too.
These NCD’s have monthly and cumulative interest payment options.
It offers both secured NCD’s for 15 months, 21 months, 39 months, 48 months, 66 months and for 84 months tenure.
It offers unsecured NCDs for 84 months tenure.
Bond face value 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 (provided the buyer is available on that date when you sell such NCD’s).
NCD’s can be invested through Demat account only.
Non-resident Indians (NRI’s) cannot invest in these NCD’s.
The issue size is Rs 150 Crores with an option to retain another Rs 150 Crores aggregating to Rs 300 Crores.
Karvy Investor Services and SMC Capital are the Book Running lead Manager for this issue.
What are the Interest Rates offered in Kosamattam Finance Mar 2020 NCDs?
What are the credit ratings for these NCDs?
These NCDs have been rated as IND BBB Outlook Stable by India Ratings. The rating of these NCDs from India Ratings indicates that instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
Kosamattam Finance NCD – March 2020 – 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 in your income tax return and pay necessary income tax.
How the company is doing in terms of Financials?
It earned revenues of Rs 434 Crores for FY18 and Rs 468 Crores for FY19.
Its profits are Rs 26.7 Crores for FY18 and Rs 30.4 Crores for FY19.
Net Non Performing Assets (NPA) are at 0.59% in FY18 and 1.28% in FY19 which is high in the last 5 years.
What is the Seniority in Secured NCDs?
For Secured NCDs, it woud be treated as Senior. The claims of the Debenture Holders holding the Secured NCDs shall be superior to the claims of any unsecured creditors including the Unsecured NCDs, subject to applicable statutory and/or regulatory requirements.
The Secured NCDs would constitute secured obligations of company and shall rank pari passu with the existing secured creditors on all movable assets, including book debts and receivables, cash and bank balances, loans and advances, both present and future of company equal to the value 1 time of the debentures outstanding plus interest accrued thereon, excluding a written down value of furniture and fixtures to the extent of Rs 10.8 Crores. Claims of all other lenders shall rank higher than unsecured NCDs in the nature of Subordinated Debt.
What are the objects of the NCD issue?
Here are the objects of the offer.
1) For the purpose of onward lending
2) Repayment of interest and principal on existing loans;
3) General Corporate Purposes;
Why to invest?
1) It offers secured NCD bonds. Secured NCD’s are secured by movable assets, including book debts, receivables, etc. Means in case company gets windup due to bad performance of the company, investors of NCD would get preference in re-payment of the principal. However, there could be delays. Hence it is relatively safe to invest in such secured NCD’s.
2) Attractive yield up to 10.75%.
3) The company has good growth in interest income in the last few years.
4) You can double your money in 88 months with unsecured NCDs.
Why not to invest?
1) They have had negative net cash flows from its operating, investing and financing activities in the recent fiscal years. Any negative cash flows in the future may adversely affect its results of operations and financial condition.
2) India Rating agency has rated these bonds as IND BBB Outlook Stable. The rating of NCDs by India Ratings indicates that instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such poor credit rating NCD’s are high risk.
3) Complete risk factors of Kosamattam Finance NCD of Mar 2020 can be read at risk factors indicated in the prospectus.
How to invest?
You can login to your demat account and apply under IPO/NCD/NFO section. These NCDs would get listed within 6 working days from the closure of the NCD subscription.
Should you invest in Kosamattam Finance NCD – Mar 2020?
They offer both secured and un-secured NCDs. Un-secured are high risk and one should stay away. Secured NCDs offered by them have high interest rates / yield. These company NCDs have low credit rating. Investing in NCDs in NBFC companies is high risk now. You should stay away from putting your hard earned money in such low credit rating NCDs. You can invest in some of the high credit rating NCDs that are keep coming to market now and then. You can also check some of the best multicap mutual funds which we recommended last week.
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Kosamattam Finance NCD March 2020 – Issue Details and Risk Factors
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