10.75% Kosamattam Finance NCD – March 2021 – Review

Kosammtam Finance NCD - March-april-2021 - ReviewKosamattam Finance NCD – March /April – 2021 – Review

Kosamattam Finance is coming up with secured and unsecured NCD bonds now. These bonds would open for subscription on 30th March, 2021. Kosamattam Finance is a leading NBFC company in India. The NCD interest rates for Kosamattam Finance NCD are up to 10.25% and yield is up to 10.75%. These NCDs are offered for 400 days to 84 months tenure. These interests are paid either monthly or on maturity. Should you invest in Kosamattam Finance NCD March, 2021? What are the risk factors one should consider before investing in such high risk NCDs?

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About Kosamattam Finance Limited

Company is a systemically important non-deposit taking NBFC primarily engaged in the gold loan business, lending money against the pledge of household, jewelry in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry. Its Gold Loan portfolio as of the six month period  ended Sep-20 and for the financial years FY20, FY19 and FY8 comprised of 97.49%, 97.29%, 94.94% and 91.56% of its our total loan portfolio as of those dates.

Kosamattam Finance NCD March, 2021 / April, 2021– Issue Details

Subscription opens on 30-March-2021

Subscription closes on 23-April-2021

NCD’s are available in 8 different options. The tenures for these NCDs are for 400 days, 24 months, 36 months, 42 months, 48 months, 66 months and 84 months tenure.

Coupon interest rates for Category I, II III & IV investors (including Retail investors) are between 9.25% to 10.25%.  Yield on these NCD bonds works out up to 10.75% which is highest.

It issues secured NCDs + unsecured NCDs. Its unsecured NCDs are for 66 months + 84 months tenure NCDs.

Interest is payable monthly or 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 within 6 working days from the issue closure date. Hence these are some what liquid investments.

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.

The base issue size for March 2021 NCD issue is Rs 175 Crores with an option to retain over subscription up to Rs 175 Crores totaling to Rs 350 Crores.

Karvy Investor Services and SMC Capitals are the lead managers for the issue.

Download Kosamattam Finance March, 2021 NCD Prospectus

Interest rates of Kosamattam Finance March, 2021 NCD

Kosammtam Finance NCD Interest Rates - March-april-2021

What are the credit ratings for these NCDs?

These NCDs have been rated as BWR BBB+/Stable by Brickwork Ratings which indicates that instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.

How is the company doing in terms of profits?

Here are the details of profits of the company.

Year ending Mar-2019 – Rs 43.14 Crores

Year ending Mar-2020 – Rs 47.63 Crores

Half year ending Sep-2020 – Rs 30.36 Crores

Why to invest in these NCDs?

1) These Kosamattam NCDs offer attractive interest rates where investors can get interest up to 10.25% per annum and yield up to 10.75%

2) Kosamattam 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 and unsecured 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 company has a credit rating of BBB+ / Stable from BWR Ratings. Bonds that have a credit rating with below A grade are considered as very high risk.

2) Recent outbreaks of the novel coronavirus could have a significant effect on its results of operations and could negatively impact its business, revenues, financial condition and result of operations.

3) Refer prospectus for complete risk factors.

How to subscribe to these NCDs?

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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Should you invest in Kosamattam Finance NCD in March, 2021?

Kosamattam Finance NCD 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 BBB+/Stable by BWR Ratings which are considered as low rating. Such credit ratings may further fall in future. One should always invest in AAA rated NCDs. For me this NCD issue is HIGH RISK considering the credit rating provided by credit rating agency. I would advise investors to stay away from such high risk NCDs as of now.

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Suresh KP

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