Muthoot Fincorp NCD – Sep-21 / Oct-2021 – Review
Trivandrum based Muthoot Fincorp has come up with secured and unsecured NCD bonds. The NCD Issue that would open for subscription on 30th September 2021. Muthoot Fincorp Limited is leading NBFC company which has emerged as prominent gold loan player in India. Muthoot Fincorp offers interest rates are up to 9.75% and yield works out to be 10.2%. These NCD’s are issued in 9 different series and 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 September/October 2021? What are the risk factors one should consider before investing in such high risk NCDs?
About Muthoot Fincorp Limited
They are a non-deposit taking systemically (I think this time there is no typo error😊) 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 the past 5 years, 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.
Muthoot Finance Vs Muthoot FinCorp – Are they part of same group?
We have provided this info in our earlier articles, but indicating again for readers benefit.
Muthoot FinCorp and Muthoot Finance are two separate companies without any common promoters. Muthoot FinCorp is headed by Thomas John Muthoot, while Muthoot Finance is headed by M G George Muthoot. While the two parameters are family, cousins, they have no mutual business relations.
Muthoot Fincorp NCD – Sep-2021 Issue Details
Muthoot Fincorp NCD opens on Thursday, 30th September 2021 and closes on Tuesday, 26th October 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.
SMC Capitals Limited is the lead manager for this NCD issue.
What are Muthoot Fincorp NCD Interest Rates?
What are the Muthoot Fincorp NCD ratings?
The 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 low 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-2019 – Rs 372.6 Crores
Year ended Mar-2020 – 257.9 Crores
Year ended Mar-2021 – 397.2 Crores
Why to invest in Muthoot Fincorp NCD’s?
1) 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 NCD holders or payments to creditors.
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. Regarding secured NCDs, in case company gets shut down or get into financial crisis 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 secured NCD options. One can ignore unsecured NCDs.
Why not to invest in Muthoot Fincorp NCD?
Here are the risk factors of investing in these non-convertible debenture bonds.
1) Covid-19 pandemic is still uncertain and can impact company operations and financial condition in future too.
2) Scheduled commercial banks and payment banks have been directed not to open and maintain current accounts for customers who have availed credit facilities in the form of cash credit (CC)/overdraft (OD) from the banking system. Implementation of the aforesaid direction without providing alternate mechanism for financial institutions transacting with scheduled commercial banks and payment banks to withdraw and deposit cash may adversely affect its business.
3) Company credit profile may take an impact because of real estate property acquisition since such acquisition brings real estate risks.
4) Company business requires substantial capital, any disruption in funding sources can have impact on company business.
5) Company financial performance is particularly vulnerable to interest rate risk.
6) Refer prospectus for complete risk factors.
Should you invest in Muthoot Fincorp NCD Sep-2021 issue?
Muthoot Fincorp offers both secured and unsecured NCDs as part of September 2021 issue. These NCDs offers high interest rate up to 9.75% and yield works out to be 10.2%. These NCDs have good credit rating of A+ by CRISIL (while AAA rated bonds are more secured). There are some risks of investing in NBFC NCDs. There could be delay in getting interest on NCDs. There could be abnormal delays in repayment of capital in future. Investors should understand these risk factors before investing in any NBFC NCDs. High-risk investors can invest in short term to medium term NCD bonds. One should avoid unsecured NCDs as the risk would be very high.
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