12.61% Manappuram Finance Secured NCD Dec-13/Jan-14

Manappuram Finance NCD-December-2013-January-2014; Manappuram NCD provide high returns12.61% Manappuram Finance Secured NCD Dec-13/Jan-14

Updated: Latest Manappuram Mar-2014 NCD analysis is here. After Muthoot Finance NCD’s, another gold loan company Manappuram Finance is issuing secured non-convertible debentures (NCD). It comes with 11 different options where the tenure is for 400 days to 70 months. These NCD’s can double your money in just 70 months (less than 6 years). The annualized yield is as high as 12.61% per annum. Can we invest in Mannapuram Finance NCD? What are its features and what risks are involved if we invest in Manappuram Finance NCD of Dec-2013 / Jan-2014 issue.

About Manappuram Finance Limited

Manappuram Finance is a leading gold loan company / non banking financial company (NBFC) which is engaged in providing gold loans against house hold gold ornaments. This company is listed in BSE and NSE.

Also read: Top-5 Midcap/Small cap mutual funds to invest in 2014

Manappuram Finance NCD

Manappuram Finance is issuing 11 options of NCD’s which are secured in nature. For secured NCD the assets are backed up for principal and interest. In case of wind-up of the company, investors of NCD would still get their principal investment and interest.

Features of Manappuram Finance NCD

  • Issue start date: 30-Dec-2013
  • Issue end date: 20-Jan-2014. However it would be closed if the required subscription is received earlier than this.
  • NCD’s are available in 11 different options.
  • Interest payable monthly, annually and at maturity depending on the option of NCD.
  • 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 stock exchanges. Hence these are liquid investments.
  • Non-Resident Indians (NRI’s) can invest in these NCD’s in Options V to Options XI in demat form only. They can apply on repatriation and non-repatriation basis.
  • The issue size is Rs 100 Crores with an option to retain over subscription for another Rs 100 Crores
  • NCD ratings are A+/Negative by CRISIL.
  • Manappuram Finance NCD Prospectus

Below are the Interest rates details.

Manappuram Finance NCD – Interest Chart (Dec-2013/Jan-2014)
Series Tenure (Months) Face Value (Rs) Interest payment Coupon Rate (Interest) Individuals Effective yield per annum Maturity Value
I 400 days 1,000 Cumulative NA 11.00% 1,122
             
II 24 1,000 Monthly 11.50% 12.13% 1,000
             
III 24 1,000 Annually 12.00% 12.00% 1,000
             
IV 24 1,000 Cumulative NA 12.00% 1,254
             
V 36 1,000 Monthly 12.25% 12.94% 1,000
             
VI 36 1,000 Annually 12.50% 12.50% 1,000
             
VII 36 1,000 Cumulative NA 12.50% 1,424
             
VIII 60 1,000 Monthly 11.50% 12.13% 1,000
             
IX 60 1,000 Annually 12.00% 12.00% 1,000
             
X 60 1,000 Cumulative NA 12.00% 1,762
             
XI 70 1,000 Cumulative NA 12.61% 2,000
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How is the company is doing in terms of profits?

Its profits are as below:

  • Year ended Mar-2009 – Rs 30.30 Crores
  • Year ended Mar-2010 – Rs 119.72 Crores
  • Year ended Mar-2011 – Rs 282.66 Crores
  • Year ended Mar-2012 – Rs 591.46 Crores
  • Year ended Mar-2013 – Rs 208.43 Crores

Non Performing Assets (NPA) of the company are 0.67% (FY2011-12) Vs 1.21% (FY 2012-13). Last 6 months ended Sep-2013 indicates at 1.06%.

Why to invest?

  • Company is earning good profits in the last 5 years. However its profits declined in the last 2 years.
  • It offers secure NCD’s where your money is safe. Means in case of wind-up of the company due to non performance, investors of NCD would still receive the principal and interest. Hence it is safe to invest in such secured NCD’s.
  • Attractive interest rates where annualised yield comes between 11.00% to 12.61% per annum
  • You can double your money in 70 months (less than 6 years)

Why not to invest?

  • Capital adequacy ratio as per RBI limit should be 15% and actual as on 31-Mar-2013 is 22.67% which is the outside RBI limit.
  • Loans on gold ornaments are riskier. Decline in gold prices (which happened a few months back), can pose high risk to such business.
  • Increase in NPA’s for the year ending Mar-2013 is a major concern.

Also Read: 10 Ways to double your money

How to apply?

The majority of the stock brokers who maintains demat accounts are offering the service. You can also directly apply through ICICI Direct or any other institutions indicated in the application form, if you would like to go for physical forms. However you need to have these NCD's in demat form to sell them.

Conclusion: Since these Manappuram NCD’s are secured and provides high rate of interest, you can consider this as one of the best investments. However you should consider the risks involved in investing companies. Though your investment and interest are secured, in case of non performance of the company, your payment may get delayed.

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Suresh
Manappuram Finance NCD December 2013 / January, 2014

Suresh KP

25 comments

  • vivek

    hey please help me i dont ahve a demat account i am 20 years old tybcom student and want to invest in ths ncd for 3years monthly scheme in physicl form will ill need to pay tds or something like that?

  • shiv anand

    Suresh,

     

    I donot have D Mat account. Can i apply to ncd? Will there be any problem while redemption?

    • Hi Shiv, Yes you can apply in physical form. There are 2 disadvantages for physical form 1) TDS would be deducted as per company norms. If you are in low tax bracket or your income is not taxable, you need to claim this money back when you file IT return 2) You cannot dispose it off when you want any urgent money. There is huge process for that. But I am wondering that there are still investors who do not have demat account 🙂 You should open one. It costs you small charges of less than Rs 1,000 per year as maintenance. Otherwise only transaction charges for any transaction applies, there is nothing more.

  • Krishna

    Dear Sir,

    I would like to know if there is TDS. As per the prospectus:

    IMPLICATIONS UNDER THE INCOME-TAX ACT, 1961 (‘I.T. ACT’)
    I. To the Resident Debenture Holder
    1. Interest on NCD received by Debenture Holders would be subject to tax at the normal rates of tax in accordance with and subject to the provisions of the I.T. Act and such tax would need to be withheld at the time of credit/payment as per the provisions of Section 193 of the I.T. Act. However, no income tax is deductible at source in respect of the following:
    a. In case the payment of interest on debentures to a resident individual or a Hindu Undivided Family (‘HUF’) Debenture Holder does not or is not likely to exceed ` 5,000 in the aggregate during the financial year and the interest is paid by an account payee cheque.
    b. On any security issued by a company in a dematerialized form and is listed on recognized stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 and the rules made thereunder. (w.e.f.01.06.2008).

    Since these NCDs are issued in DEMAT form, there should not be any TDS, right?

    Regards,

    Krishna.

     

    • Krishna, If taken on demat form, there is no TDS. However it is immaterial about TDS. You need to declare this in your IT form and pay income tax based on your income tax slab.

  • Anil

    Hi Suresh,

    Are these NCD's taxable? IF yes, then i believe the tax will be charged on the interest earned. How will the tax deduction take place in the 70 months scheme? As the table suggests the interest to be cumulative. Hence at the end of 70th month one is bound to recieve double the investment. But if the same is taxable then how the company state that the value of the bondholders will be doubled?

     

    Thanks,

    Anil 

    • Hi Anil, These are pre-tax returns. Generally companies would deduct TDS @ 10%. However tax payers need to declare the interest income every year in their income tax returns and pay tax according to their tax slabs. Yes this is natural advertisement like any other investment option. None of the taxable investment options indicate post tax returns as the tax would depend on individual income tax slab. 

  • bhavesh

    Hi Suresh,

    I regularly follow your posts and they are certainly of great help.

    My first question is about their liquidity,is demat the only way to sell of such ncd's,I read somwhere that some ncd's offer "put option" to exit the ncd

    secondly I wanted to ask what is a good period to invest in such instruments since manapurram has tenure from 400 days to 70 months

    • Bhavesh, Thanks for your message. Demat is the only way to sell NCD’s. As per my knowledge there is no put option for such investments. 2) Generally these options should be invested for shorter period of less than 5 years. However since these are secured investments, you can still invest for 70 months.

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