10.75% Muthoottu Mini Financiers NCD Jan-2021 issue – Review
Muthoottu Mini Financiers NCD Bonds Jan-2021 issue – Review
Muthoottu Mini Financiers is coming up NCDs that would open for subscription on January 13, 2020. It is issuing secured and unsecured NCD’s now. The interest rates are as high as 10.25%. It is offering NCDs of 480 days, 24 months, 42 months, 61 months, 66 months and 84 months tenure. Currently banks are offering low interest rates of 4% to 5.5% and investors might be looking for high interest rate fixed income options. Should you invest in Muthoottu Mini Financiers NCDs of January, 2021 issue? What are the risk factors one should consider before investing in such high risk NCDs.
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 Jan-2021 Issue details
Muthoottu Mini Financiers is issuing secured and unsecured redeemable Non Convertible Debentures (NCD’s) in the January issue to the tune of Rs 125 Crores with an option to retain another Rs 125 Crores towards over subscription, totaling to Rs 250 Crores. It comes with 8 different options, which contains 480 days, 24 months, 42 months, 61 months, 66 months and 84 months tenure NCDs.
About Muthoottu Mini Financiers Jan-2021 Secured NCD
They are offering both secured and unsecured NCDs.
Regd secured NCDs, these 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.
Features of Muthoottu Mini Financiers NCD’s of Jan-2021
NCD Issue start date: 13-January-2021
NCD Issue closes on: 9-February-2021
NCD’s are available in 8 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.
IND Ratings has rated these NCDs as IND BBB: Outlook Stable, 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.
Muthoottu Mini Financiers NCD Interest Rates
How is the company doing in terms of Financials?
Here are the financial performance.
1) Its revenues have fallen from Rs 435.4 Crores in FY2017 to Rs 313 Crores in FY2020. Its revenues for the 6 months ended Sep, 2020 are at Rs 173 Crores compared to Rs 146 Crores of previous year 6 months ending Sept, 2019.
2) It incurred loss of Rs 81 Crores in FY2017 vs profits of Rs 33.5 Crores in FY2020. Its profits for the 6 months ending Sept, 2020 are at Rs 19.46 Crores compared to profits of Rs 4.72 Crores for the previous year 6 months ending Sept, 2019.
3) Its gold loan business is around 95% of its overall business as at the end of September, 2020.
3) Gross NPA is at 1.02% by the end of Sept, 2020. Net NPA is at Rs 0.59% for similar period.
Why to invest?
1) This is a Leading NBFC company in India.
2) Attractive interest rates where one can get 10.25% interest.
3) It is issuing both secured NCD as well as unsecured NCDs. Secured NCDs are safe to invest compared to other NCDs.
Why not to invest in Muthoottu Mini Financiers Jan-2021 NCD?
1) Low credit rating from IND Ratings as IND BBB; Outlook Stable.
2) Its revenues and profits are in a down trend 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) 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.
When these NCDs would get listed on BSE?
These NCDs would get listed after 6 working days from the date of closure.
Also Read: Best SIP Mutual Funds to invest in 2021
Should you invest in Muthoottu Mini Financiers NCDs Jan-2021 issue?
Here are a few thoughts about such NCDs
1) Currently banks are providing reduced interest rates which are between 4% to 5.5% per annum. Muthoottu Mini Financiers is offering secured NCDs that offers high interest rates up to 10.25%. This would attract investors who are looking to earn higher fixed income.
2) These NCDs are rated as IND BBB Outlook Stable which are considered as low. One should always invest in AAA rated NCDs or fixed deposits which can provide some safety to their investments.
3) One should not forget about NBFC crisis (e.g. DHFL crisis) that started a few years back. Your investment as well as interest could be at risk and there could be delays in repayment of your matured NCDs.
5) For me, this NCD issue is a VERY HIGH RISK. I would advise investors to stay away from such NCDs as of now.
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