After 3 months, Muthoot finance is again coming up with NCD’s. Muthoot Finance NCD April 2017 would open for subscription on 11th April, 2017. It is issuing secured and un-secured NCD’s in this current issue. The yield rates are as high as 9.06% per annum compared to Jan-17 NCD yield of 9.25%. Banks are reducing interest rates month on month. Should you invest in Muthoot Finance NCD’s of Apr-2017 as other fixed income options are offering lowest rates? What are the risk factors one should consider before investing in Muthoot Finance NCD April 2017? Let me do Muthoot Finance NCD Review in this article.
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About Muthoot Finance Limited
Muthoot Finance is largest gold loan company in India in terms of loan portfolio and branch network. It has already issued several NCD’s in the past in the form of secured and unsecured NCD’s.
Details of Muthooth Finance NCD April 2017
Muthoot Finance is issuing secured and un-secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 200 Crores with an option to retain over ssubscription totaling to Rs 2,000 Crores. It comes with 11 different options, which contains 400 days to 96 month tenure. The earlier issue of NCD also, it had highest tenure of 96 months.
The Muthoot Finance issue contains 11 options of NCD’s and 1 to 10 are secured and 11th option is unsecured.
a) About Muthoot Finance Secured NCD of April 2017
For secured NCD’s the assets are backed up for principal and interest. In case of anything happening to the company and company get closed, investors of NCD would still get their principal investment and interest.
b) About Muthoot Finance Unsecured NCD’s of April 2017
For un-secured NCD the assets are NOT backed up for principal and interest. In case something happens to company performance and company is closed, investors would be given normal preference in repayment of capital and interest.
Features of Muthoot Finance NCD of April-2017
- Issue start date: 11-April-2017
- Issue end date: 10-May-2017
- NCD’s are available in 11 different options.
- Interest payable monthly, annual and cumulative, depending on the option of NCD.
- The 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 BSE. Hence, these are liquid investments.
- Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
- ICRA has given a rating of ICRA AA/Stable and AA-Stable by Crisil, which indicates a high degree of safety for payment of principal and interest.
- The prospectus can be downloaded from the BSE website here.
Here are the interest rates on the April 2017 NCD’s of Muthoot Finance
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How is the company doing in terms of Financials?
Revenues of the company have increased from Rs 4,324 Crores (FY 2014-15) to Rs Rs 4,919 Crores (FY 2015-16).
Profits have reduced from Rs 670 Crores (FY 2014-15) to Rs 814 Crores (FY 2015-16).
Why to invest?
- Largest gold loan financing company
- It offers secure NCD’s also where your money is safe. Means in case of anything happening to the company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
- Attractive interest rates between 8% to 9.06% per annum
- You can double your money in 96 months (8 years)
Why not to invest?
- Flucutating revenues. Revenues for FY15 is down compared to FY14.
- Even profits are flucutating. It has seen 14% negative growth in FY15 compared to FY14. Reduction in profits can lead to delay in interest payment.
- Increase in NPA’s in the last couple of years is a major concern.
- Gold finance companies are riskier. Decline in gold prices (which happened last year), can pose high risk to such business.
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How to apply?
If you have demat account, you can apply through your demat broker online. These can be easily sold at later point of time if you can take them in demat form, however you can sell at market price only. You can also apply in physical form by visiting the company website and downloading the application form and preparing the cheque and submitting at collection centres.
Conclusion: As indicated in my previous articles about Muthoot Finance NCD’s, while I am interested to get higher interest, I am equally interested to protect my investment. I would not look for any unsecured NCD’s. High risk takers can invest in the secured NCD (First 10 options), after considering the risk risk factors indicated above.
Readers, have you investing in any NCD’s these days? What are your experiences on this?
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Muthooth Finance NCD April 2017 Review
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Thank you for the brief but apt information!!
A minor typo correction. Profits reduced to 670 chores from 814 crones.
In which company profits can reduce please disclosed very clearily.