Muthoot Fincorp NCD issue - April 2021 - Review

10.2% Muthoot Fincorp NCD issue April 2021 – Review

Muthoot Fincorp NCD issue - April 2021 - ReviewMuthoot Fincorp NCD issue April 2021 – Review


Muthoot Fincorp has come up with secured and unsecured NCD bonds Issue that would open for subscription on 7th April, 2021. Muthoot Fincorp Limited is leading NBFC company in India. Muthoot Fincorp offers interest rates are up to 9.75% and yield works out to be 10.2%. These bonds are issued for 27 months to 87 months tenure. Investors can get fixed income, either monthly or on maturity depending on the option chosen. Should you invest in Muthoot Fincorp NCDs of April, 2021? What are the risk factors one should consider before investing in such high risk NCDs?

Also read: 8.25% Muthoot Finance NCD Opens – Should you subscribe?

About Muthoot Fincorp Limited

They are, a non-deposit taking systemically important NBFC in India.  The company emerged as a prominent gold loan player with 75% growth in its gold loan portfolio to  Rs 39,700 lakhs in FY 2011. From FY 2014 to FY 2019, the company has shown a significant increase in its gold loan portfolio at a compound annual growth of around 13%. The personal and business loans secured by gold jewelry and ornaments offered by the company are structured to serve the business and personal purposes of individuals who do not have ready or timely access to formal credit or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements.

Features of Muthoot Fincorp NCD April, 2021

Muthoot Fincorp NCD opens on Wednesday, 7th April, 2021 and closes on Thursday, 29th April, 2021.

NCD’s are available in 9 options. It offers NCD bonds for 27 months, 38 months, 60 months, 72 months and 87 months tenure.

Coupon interest rates are between 8.25% to 9.75%. The yield ranges between 8.57% to 10.2%.

They are issuing both secured redeemable NCDs and unsecured NCDs.

Interest payable monthly and on maturity depending on the option chosen by the NCD 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.

The base issue size is Rs 200 Crores with an option to retain over subscription up to Rs 200 Crores totaling to Rs 400 Crores.

This NCD issue security symbol is MFINCORP10.

SMC Capitals Limited is the lead manager for the issue.

Download Muthoot Fincorp NCD April-2021 Prospectus

Muthoot Fincorp NCD Interest Rates

Muthoot Fincorp NCD Issue - Apr-2021 - Interest Rates

What are the credit ratings for these NCDs?

The Secured NCDs have been rated as A+ (Stable) by CRISIL indicate that instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.

When these NCD bonds would 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?

Its consolidated profits are as below:

Year ended Mar-2018 – Rs 119.8 Crores

Year ended Mar-2019 – Rs 387.6 Crores

Year ended Mar-2020 – 257.9 Crores

Why to invest in these NCDs of Muthoot Fincorp?

1) The company is earning consistent margins in the last few years. This indicates that this company has ability to consistently pay the interest rates for its creditors or NCD holders.

3) These NCDs offer attractive interest rates where investors can get interest up to 9.75% and yield up to 10.2%.

4) It issues both secured and unsecured NCDs. Regd secured NCDs 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 as those backed up by assets of the company. Hence it is safe to invest in such secured NCD options. One can ignore unsecured NCDs.

Why not to invest in these bonds?

Here are the risk factors of investing in these bonds.

1) The Spread of COVID-19 pandemic and the consequent nationwide lockdown to impact its operations and financial condition.

2) The Company’s credit profile may take an impact because of real estate property acquisition, since such acquisitions brings real estate sector risks.

3) Its business requires substantial capital, and any disruption in funding sources would have a material adverse effect on its liquidity and financial condition.

4) There could be drop in credit ratings and delay in payment of interest + repayment of principal amount.

5) Refer prospectus for complete risk factors.

You may also like: LIC Bachat Plus offers 6.5% returns – Should you buy?

Should you invest in Muthoot Fincorp NCD?

Muthoot Fincorp NCD issue in April, 2021 offers high interest rate up to 9.75% and yield works out to be 10.2%. The credit rating is A+ Stable which is good, but AAA rated bonds would have been much safer. Investors should consider all risk factors in NBFC companies and the ones which we have indicated in this article. High Risk investors can invest in these NCD bonds for short to medium term. One should avoid unsecured NCDs as well as long tenure bonds.

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Suresh KP

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