11% Muthoottu Mini Financiers NCD June 2020 – Should you Avoid?

Muthoottu Mini Financiers NCD June 2020 ReviewMuthoottu Mini Financiers NCD June 2020 Review


Muthoottu Mini Financiers is coming up with NCD issue that would open for subscription from 3rd June, 2020. It is issuing secured NCD’s now. The interest rates are as high as 10.5% and yield is as high as 11.02% per annum. It is offering NCDs of 480 days, 24  months, 36 months, 50  months and 85 months tenure. Currently banks are offering low interest rates of 4% to 6.5% and investors might be looking for high interest rate fixed income options. Should you invest in Muthoottu Mini Financiers NCD 2020? What are the risk factors one should consider before investing in such high risk NCDs.

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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.

Muthoottu Mini Financiers NCD June 2020 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 7 different options, which contains 480 days, 24 months, 36 months, 50 months, 60 months and 85 months tenure NCDs.

About Muthoottu Mini Financiers June 2020 Secured NCD


They are offering secured NCD’s now in June 2020. 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 the 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.

Issue details of Muthoottu Mini Financiers NCD of June 2020


NCD Issue start date: 3-June-2020

NCD Issue closes on: 26-June-2020

NCD’s are available in 7 different options.

The interest on these NCDs are payable monthly and at maturity depending on the NCD 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.

CARE has rated these NCDs as BBB-; Stable which indicate that instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations and carry a moderate credit risk.

Vivro Financial Services is the lead manager for this issue in 2020.

Download Muthoottu Mini Financiers NCD Prospectus.

Muthoottu Mini Financiers NCD Interest Rates


Muthoottu Mini Financiers NCD Interest Rates June 2020

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How is the company doing in terms of Financials?


Here are the financials in the last 3 years.

1) Its revenues have fallen from Rs 435.4 Crores in FY2017 to Rs 298.1 Crores in FY2019. Its revenues for the half year ended Sep-2019 are at Rs 145 Crores compared to Rs 152 Crores of previous half year ending Sep-2018.

2) It incurred loss of Rs 81 Crores in FY2017 and earned a profit of Rs 20.95 Crores in FY2019. Its revenues for the half year ended Sep-2019 are at Rs 4.7 Crores compared to Rs 12.5 Crores of previous half year ending Sep-2018.

3) Its current gold loan business is around 93.3% of its overall business for the year FY2019.

3) Gross NPA is at 1.84% for the year FY2019. Net NPA is at Rs 1.08% for similar period.

Why to invest?


1) This is a Leading NBFC company in India.

2) Attractive interest rates where one can get 11% 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 June 2020 NCD?


1) Low credit rating from CARE Ratings as CARE BBB-; Stable.

2) Its revenues and profits are in downtrend in the last few years.

3) 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 the business and financial condition of the company.

4) Volatility in the market price of gold may adversely affect their financial condition, cash flows and results of operations.

5) You can refer all risk factors in the NCD prospectus.

How to apply these NCDs?


You need to apply these NCDs in demat form. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. You can reach out to any of the lead managers websites to know more details on how to apply them.

How Interest received from these NCDs are 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.

Also Read: TNPFC FD Scheme offers upto 10.9% Yield – Should you invest?

When these NCDs would get listed on BSE?


These NCDs would get listed after 6 working days from the date of closure.

Should you invest in Muthoottu Mini Financiers NCD of June 2020?


They are offering secured NCDs now in this 2020 issue. NCDs offered by them have high interest rates + yield. However the company has low credit rating of BBB-; Stable. Investing in NCDs in NBFC companies is high risk now. You should stay away investing now in NBFC companies that too, which has low credit rating on their NCDs. You can check for some of the quality NCD’s that keep coming to market.

Readers, do you feel these NCDs are worth investing?

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Suresh KP

Muthoottu Mini Financiers NCD June 2020 Issue Review

Suresh KP

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