8% Muthoot Finance NCD issue of April 2022 – Review
Muthoot Finance NCD – April 2022 – Issue Details, Interest Rates and Review
Muthoot Finance is coming up with 2022 Tranche-I secured NCD bonds now. These bonds would open for subscription on 7th April, 2022. Muthoot Finance is the largest gold loan business company in India. The NCD interest rates for Muthoot Finance NCD are up to 8%. These NCDs are offered for 36 months to 120 month tenure. Interest is paid either monthly, yearly or on maturity. Should you invest in Muthoot Finance NCD issue of April, 2022? What are the risk factors one should consider before investing in Muthoot Finance upcoming NCD 2022?
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About Muthoot Finance Limited
Muthoot Finance Limited is the flagship company of the Kerala-based business house, The Muthoot Group, which has diversified operations in financial services, healthcare, education and hospitality.
It is incorporated in 1997 and is India’s largest gold loan focussed NBFC with total loan assets (standalone) of Rs. 54,688 crore and 4,617 branches as on December 31, 2021.
The company derives a major portion of its business from South India (50% of the total gold loan portfolio as on December 31, 2021), where gold loans have traditionally been accepted as a means of availing short-term credit, although it has increased its presence beyond South India over the last few years.
Muthoot Finance NCD issue details
As per the NCD prospectus in SEBI portal, Muthoot Finance NCD opens on Thursday, 7th April, 2022 and closes on Friday, 29th April, 2022.
NCD’s are available in 8 different options. The tenures for these NCDs are for 36 months, 60 months, 84 months and 120 months tenure.
Coupon interest rates for Category IV – Retail investors are between 7% to 8%. Yield on these NCD bonds works out up to 8% which is higher. The other category of investors would get 0.5% lower interest.
These are 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 1,000.
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 somewhat 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 400 Crores totaling to Rs 500 Crores.
AK Capital Services is the lead manager for the issue.
Muthoot Finance NCD Interest Rates – April-2022 Issue
What are the credit ratings for these NCDs?
Muthoot Finance NCD rating is assigned as AA+ (Stable) by ICRA. Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
How is the company doing in terms of profits?
Its consolidated profits are as below:
FY2020 – Rs 3,169 Crores
FY2021 – Rs 3,819 Crores
9 Months ending Dec-21 – Rs 3,025 Crores
Why to invest in these NCDs?
1) Muthoot Finance NCDs offer attractive interest rates where investors can get interest up to 8% per annum.
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 lockdowns and covid restrictions have impact on its operations and financial condition. Any covid related restrictions or lockdowns in the future would have an 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 NCD prospectus for complete risk factors.
How to invest in Muthoot Finance 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.
How safe is Muthoot Finance NCD?
These NCD bonds are rated as AA+ by ICRA. Such credit rating carry low credit risk.
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Should you invest in Muthoot Finance NCD?
Muthoot Finance NCD issue in 2022 offers high interest rates. These NCDs are rated as AA+ by ICRA which are considered as good (while AAA ratings bonds could have been better). However, these credit ratings can change in future without any notice. Since these are secured NCDs, these are a little safer. In recent times, bank FDs and debt funds are providing very low returns. High risk investors can invest in these NCDs for short term to medium term. In the long term, these could turn to be riskier.
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I wonder Why you didn’t write on Ruchi Soya FPO. Retail Inveators will be getting 100% Allotment as subscription total is 336% but 90% in retial. What should one do? Book Listing Gains? Keep it for short term? Or Long Term? Any suggestions or ur personal views please.
You can hold it for short term and book profits.
Thank you so much for the response.