Muthoot Finance NCD (Tranche III) – Oct 2022 – Issue Details
Muthoot Finance is coming up with Tranche III secured NCD bonds now. These bonds would open for subscription on 6th Oct, 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 60 month tenure. Interest is paid either monthly, yearly or on maturity. Should you invest in Muthoot Finance NCD issue of Oct, 2022? What are the risk factors one should consider before investing in Muthoot Finance Tranche III NCD’s of 2022?
Also Read: Should you invest in Edelweiss Finance NCD’s offering 10% interest?
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 – Oct-2022
Muthoot Finance NCD of Tranche III would open on Wednesday, 6th Oct, 2022 and closes on Friday, 27th October, 2022.
NCD’s are available in 7 different series. The tenures for these NCDs are for 36 months, 24 months and 60 months.
Coupon interest rates for Category II and IV (Retail investors) are between 7.5% 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 75 Crores with an option to retain over subscription up to Rs 225 Crores totaling to Rs 300 Crores.
Muthoot Finance NCD Interest Rates – Oct-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.
Muthoot Finance NCD interest payment date
Interest payment date for Muthoot Finance NCD would be the first day of the subsequent month / year (from the date of allotment of NCDs) in case of monthly and yearly payment options. In case of cumulative option, such NCD interest would be paid on the maturity date.
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
FY2022 – Rs 4,031 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.
Also Read: High Return Mutual Funds to invest in 2022-23
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?
Muthoot Finance NCD of Oct-2022 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). However, these credit ratings can change in future without any advance intimation. Since these are secured NCDs, these are a little safer. Currently 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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While Muthoot Finance enjoys a credit rating of AA+(stable) and offers a rate of 7.75% and 8% for 36 months and 60 months respectively, at the same time, Edelweiss Financial Services having a credit rating of AA-(Negative) is offering a rate of 9.25% and 9.75% for the same tenure.
A differential of 1.50% to 1.75% for the same tenure with a small change in the credit rating – note that both enjoy an overall AA rating – only the sub-category nomenclature is different.
Hi Sir , currently. The rbi retail bonds are giving 7.75 to 7.9 . Which is more secure than this . Comparing to the interest rate . Let me know the worth on investment in this NCD compare with state government bonds
RBI bonds are 100% secure. These company NCDs has default risk
To my knowledge, RBI Retail Floating Rate Bonds’ current interest rate is 7.15% (6.80+0.35) which is valid till December 2022 and would be reset on 1st Jan and 1st July every year.
How interest rate of 7.75 to 7.9 has been arrived at – not able to understand.