Muthoot Finance NCD Sep-2023 (Tranche II) – Issue Details and Review

Muthoot Finance is coming up with Tranche II secured NCD bonds now. These bonds would open for subscription on 21st September, 2023. Muthoot Finance is the  largest gold loan business company in India. The NCD interest rates for Muthoot Finance NCD are up to 9%. These NCDs are offered for 36 months to 60 month tenure. Interest is paid either monthly or annually or on maturity. Should you invest in Muthoot Finance NCD issue of September, 2023? What are the risk factors one should consider before investing in Muthoot Finance Tranche II NCD’s of 2023?

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.

The company derives a major portion of its business from South India (50% of the total gold loan portfolio), 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 – Sep-2023

Here are the issue details.

Subscription opening Date 21-Sep-23
Subscription closure Date 06-Oct-23
Issuing Security Name Muthoot Finance Limited
Security Type Secured, Redeemable and Non-Convertible NCDs
Issue Size (Base) Rs 100 Crores
Issue Size (Option to retain over subscription) Rs 600 Crores
Total issue size Rs 700 Crores
Issue price Rs 1,000 per bond
Face value Rs 1,000 per bond
Series I to VII
Minimum Lot size 10 bonds and 1 bond there after
Tenure 24, 36 and 60 months
Interest Payment frequency Monthly and Annuallly
Listing on Within 6 working days on BSE
Lead Manager A.K. Capital Services Limited
Debenture Trustee/s Idbi Trusteeship Services Ltd

 Muthoot Finance NCD Interest Rates – Sep-2023 Issue

Frequency of Interest Payment Monthly Monthly Annually Annually Annually NA NA
Tenure (months) 36 60 24 36 60 36 60
Coupon (% per Annum)-II, III & IV investors 8.75% 8.75% 8.75% 9.00% 9.00% NA NA
Effective Yield (% per Annum)-II, III and IV investors 8.75% 8.75% 8.75% 9.00% 9.00% 9.00% 9.00%
Amount on Maturity (In Rs.) 1,000 1,000 1,000 1,000 1,000 1,295 1,538

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:

  • FY2021 – Rs 3,722.1 Crores
  • FY2022 – Rs 3,954.3 Crores
  • FY2023 – Rs 3,473.5 Crores

Why to invest in these NCDs?

  • Muthoot Finance NCDs offer attractive interest rates where investors can get interest up to 9% per annum.
  • Muthoot Finance generates consistent margins. This means that company has ability to pay interest payment on time to its NCD holders without any delay.
  • It issues secured NCDs. Its secured NCDs are safe compared to unsecured NCDs. In case a 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?

  • 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.
  • 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.
  • 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.

Should you invest in Muthoot Finance NCD of Sep-23 issue?

These NCDs provide opportunities and also comes with several risks.

  • Muthoot Finance NCD of Sep-2023 issue offers high interest rates. These NCDs are rated as AA+ by ICRA, which are considered as good (while AAA rated bonds could have been better). Since these are secured NCDs, these are safe.
  • On the other side, such credit ratings can change in future without any advance intimation. Investors should not forget about some of the NBFC companies delaying the interest as well principal re-payments in the past.

High risk investors can invest in these NCDs for short term to medium term.

Suresh KP

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