8.25% Muthoot Finance NCD issue of April 2021 – Review

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


Muthoot Finance is coming up with secured NCD bonds now. These bonds would open for subscription on 8th April, 2021. Muthoot Finance is the  largest gold loan business company in India. The NCD interest rates for Muthoot Finance NCD are up to 8.25% and yield is up to 8.25%. These NCDs are offered for 26 months to 120 months tenure. interest is paid either monthly, yearly or on maturity. Should you invest in Muthoot Finance NCD issue of April, 2021? What are the risk factors one should consider before investing in Muthoot Finance upcoming NCD 2021?

Also Read: Latest Post Office Interest Rates 2021

About Muthoot Finance Limited

They are Systemically Important Non-Deposit Taking NBFC.

Since its formation, they have broadened the scale and geographic scope of its gold loan operations so that, as of March 31, 2012, they were India’s largest provider of Gold Loans.

For the years ended March 31, 2016, 2017, 2018, 2019 and 2020, revenues from its gold loan business constituted 98.49%, 97.95%, 97.64%, 97.32% and 96.81% respectively of its total income.

In addition to its Gold Loans business, they provide money transfer services through its branches as sub-agents of various registered money transfer agencies and also provide collection agency services.

They have started providing unsecured loans to salaried individuals and loans to traders and self-employed.

They also provide micro-finance, housing finance, vehicle and equipment finance and insurance broking services through its subsidiaries.

Muthoot Finance NCD issue – April-2021

Muthoot Finance NCD opens on Thursday, 8th April, 2021 and closes on Thursday, 29th April, 2021.

NCD’s are available in 8 different options. The tenures for these NCDs are for 26 months, 38 months, 60 months and 120 months tenure.

Coupon interest rates for Category IV – Retail investors are between 6.85% to 8%. Yield on these NCD bonds works out up to 8.25% which is highest.

It issues secured NCDs.

Interest is payable monthly, yearly or on maturity depending on the option chosen by the NCD investor.

Muthoot Finance NCD Price per 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 bonds would be listed on BSE within 6 working days from the issue closure date (you can check Muthoot Finance NCD allotment status if they are allocated or not after closure date) and are some what liquid investments. However Muthoot Finance NCD Price can fluctuate depending on the buyers on that particular day.

These are allotted on first come first serve basis. Hence the issue can be closed before this date if it is oversubscribed before the closure date.

NRI’s cannot apply to this NCD subscription.

Muthoot Finance NCD base issue size is Rs 100 Crores with an option to retain over subscription up to Rs 1,600 Crores totaling to Rs 1,700 Crores.

Edelweiss Broking Ltd is the lead managers for the issue.

Muthoot Finance NCD Interest Rates – April-2021 Issue

Muthoot Finance NCD Interest Rates - April-2021

What are the credit ratings for these NCDs?

Muthoot Finance NCD rating is assigned as CRISIL AA/Positive by CRISIL and AA+/Stable by ICRA. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

Muthoot Finance NCD interest payment date

Interest payment date for Muthoot Finance NCD would be first day of subsequent month / year (from the date of allotment of NCDs) in case of monthly and yearly payment options. In case of cumulative option, such NCD interest would be paid on maturity date.

How is the company doing in terms of profits?

Its consolidated profits are as below:

Quarter ending Mar-2020 – Rs 835 Crores

Quarter ending June-2020 – Rs 857 Crores

Quarter ending Sept-2020 – Rs 930 Crores

Why to invest in these NCDs?

1) Muthoot Finance NCDs offer attractive interest rates where investors can get interest up to 8.25% per annum and yield up to 8.25%

2) Muthoot Finance generates consistent margins. This means that company has ability to pay interest payment on time to its NCD holders without any delay.

3) It issues secured NCDs. Its secured NCDs are safe compared to unsecured NCDs. In case company gets wind-up/shut down for some reason, secured 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.

Why not to invest in these NCDs?

1) The Spread of COVID-19 pandemic and the consequent nationwide lockdown for the past few months have impact on its operations and financial condition. Such lock-downs if continued in future would continue to have impact on company business.

2) Its financial performance is particularly vulnerable to interest rate risk. If they fail to adequately manage interest rate risk in the future it could have an adverse effect on its net interest margin, thereby adversely affecting its business and financial condition.

3) Refer prospectus for complete risk factors.

How can I invest in NCD online?

This issue is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. Application forms can be downloaded on the lead manager web site. For more information on this you can refer prospectus.

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How safe is Muthoot Finance NCD?

These NCD bond are rated as AA+ by CRISIL and ICRA. Such credit rating carry low credit risk, but not as safe as AAA rated instruments.

Muthoot Finance NCD issue – Should you buy?

Considering the pros cons, you might be wondering whether Muthoot Finance NCD is good or bad and should I invest in these NCDs or avoid.

Muthoot Finance upcoming NCD 2021 of April issue offer high interest rates and yield. Banks are offering low interest rates, hence investors would get tempted with such NCDs. These NCDs are rated as AA+ by CRISIL and ICRA which are considered as good (while AAA ratings bonds could have been better). However, these credit ratings can fall in future. High risk investors can invest in these NCDs for short term to medium term. In long term, these could turn to be riskier.

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Suresh KP

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