Muthoot Mercantile NCD Jan-2025 – Introduction
Muthoot Mercantile Limited is coming up with secured NCD bonds that will open for subscription on January 10, 2025. Muthoot Mercantile is an NBFC company in India that offers loans against gold and investments and also provides unsecured loans. The interest rates offered are up to 11%. This article will provide some insights into Muthoot Mercantile NCD Jan-2025, including issue details, issue dates, and review.
About Muthoot Mercantile Limited
The company operates as a non-deposit-taking Non-Banking Financial Company (NBFC) in the Base Layer category, registered with the Reserve Bank of India (RBI). Established as a public limited company in 1997 and recognized as an NBFC in 2002, the company has a long history in the gold loan sector, lending against household and used gold jewelry. Over its 84 years of operational history, the company has expanded its reach and services, primarily catering to customers with immediate funding needs but limited access to formal credit.
Business Operations
The company’s core focus lies in gold loans, complemented by unsecured personal loans (Pronote Loans). Gold loans account for an overwhelming 99.3% of the total loan portfolio as of September 30, 2024, with a loan book of ₹74,738.28 lakhs. The remaining 0.7% comprises Pronote Loans amounting to ₹523.31 lakhs.
Operating through a network of 267 branches across 11 states and union territories, including major regions such as Tamil Nadu, Kerala, Delhi, and Maharashtra, the company serves customers ranging from rural and semi-urban areas to metro cities. Its branch infrastructure facilitates loan origination, disbursement, and collection, ensuring efficient customer interaction.
The company has also developed various gold loan schemes to cater to diverse customer needs, with loans ranging from ₹1,000 to ₹1 crore and a tenure of up to 12 months. These loans are typically used for social obligations, emergencies, small-scale business operations, agriculture, or consumption needs.
Operational Highlights
Customer Base: The company served approximately 1.46 lakh customers in its gold loan segment as of September 30, 2024.
Yields: The average interest margin for gold loans was 19.58% (annualized) for the six months ending September 30, 2024.
Branch Network: Headquartered in Kerala, the company leverages its long-standing presence in South India, which forms the backbone of its operations.
Muthoot Mercantile NCD Jan-2025 issue Details
| Subscription opening Date | 10-Jan-25 |
| Subscription closure Date | 24-Jan-25 |
| Issuing Security Name | Muthoot Mercantile Limited |
| Security Type | Secured, Redeemable, Non-Convertible Debentures (Secured NCDs) |
| Issue Size (Base) | Rs 75 Crores |
| Issue Size (Option to retain over subscription) | Rs 75 Crores |
| Total issue size | Rs 150 Crores |
| Issue price | Rs 1,000 per bond |
| Face value | Rs 1,000 per bond |
| Series | Series I to IX |
| Minimum Lot size | 10 bonds and 1 bond there after |
| Tenure | 400 days, 20, 36, 60 and 73 Months |
| Interest Payment frequency | Monthly and Cumulative |
| Listing on | Within 6 working days on BSE |
| Lead Manager | Vivro Financial Services Private Limited |
| Debenture Trustee/s | Mitcon Credentia Trusteeship Services Limited |
Muthoot Mercantile NCD Jan-2025 – Interest Rates
| Series | I | II | III | IV | V | VI | VII | VIII | IX |
|---|---|---|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Monthly | Cumulative | Monthly | Cumulative | Monthly | Cumulative | Monthly | Cumulative | Cumulative |
| Tenure (Months) | 400 Days | 400 Days | 20 | 20 | 36 | 36 | 60 | 60 | 73 |
| Coupon (% per Annum) | 10.00% | NA | 10.15% | NA | 10.75% | NA | 11.00% | NA | NA |
| Effective Yield (% per Annum) | 10.47% | 10.17% | 10.64% | 10.16% | 11.30% | 10.60% | 11.57% | 10.64% | 12.07% |
| Amount on Maturity (In Rs.) | 1,000.00 | 1,112.00 | 1,000.00 | 1,175.00 | 1,000.00 | 1,353.00 | 1,000.00 | 1,658.00 | 2,000.00 |
Muthoot Mercantile NCD Jan-2025 – Credit Rationgs
The NCDs proposed to be issued under this Issue have been rated “IND BBB/Stable”. The rating of NCDs by India Ratings indicates that instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations and carry moderate credit risk.
Financials of Muthoot Mercantile Limited
(Amt in Rs. Crores)
| Period Ended | 31-Mar-22 | 31-Mar-23 | 31-Mar-24 |
|---|---|---|---|
| Assets | 420.4 | 643.4 | 799.1 |
| Revenue | 67.0 | 94.8 | 131.8 |
| Profit After Tax | 17.0 | 18.2 | 25.2 |
Muthoot Mercantile NCD Jan-2025 – Why should you invest?
- The company has consistently shown margin growth in the past. Investors should consider investing in a company with a consistent growth record.
- It has a strong brand name and a track record in India with a long operating history. It offers flexible loan schemes, high-quality customer service, and a short response time. These positive factors help the company grow, which can benefit investors through share price appreciation as well as instill trust for NCD investors and other creditors.
- It offers a high-interest rate of up to 11%.
- The company offers secured NCDs. In case the company faces a financial crisis and winds up for some reason, secured NCD investors would receive preference in the repayment of the capital.
Muthoot Mercantile NCD Jan-2025 – Risk Factors
- Company has a low credit rating of IND BBB/Stable by India Ratings and Research Limited which poses high risk.
- The company is bound by restrictive terms in its loan agreements, which may limit its operational flexibility and growth potential. These restrictions could pose significant challenges in navigating business expansion plans.
- Access to capital and funding markets is closely tied to the company’s credit ratings. Any downgrade in these ratings could lead to higher borrowing costs and reduced access to funds, adversely affecting profitability and business growth.
- The company, along with its promoters and directors, is involved in several legal cases. An unfavorable verdict in any of these proceedings could materially impact the company’s financial health and reputation.
- Key supporting documents related to the biographies of directors are unavailable. This lack of transparency may raise concerns about corporate governance practices.
- The company generates a significant portion of its revenue from Kerala, Maharashtra, and Odisha. Any operational disruptions or adverse conditions in these regions could severely affect its financial performance.
- Operating in a capital-intensive industry, the company faces the constant challenge of raising sufficient funds. Any disruptions or restrictions in accessing financial resources could strain liquidity and operational efficiency.
- The company’s profitability heavily relies on managing interest rate risks. An inability to effectively navigate fluctuating interest rates could compress margins and impact overall financial performance.
- The company’s success is closely tied to its brand recognition. Failure to maintain or enhance its brand presence could lead to a loss of customers and hinder growth opportunities.
- A high debt-to-equity ratio signals elevated financial leverage. Further increases in borrowing could worsen the company’s financial condition and limit its ability to weather economic uncertainties.
- The company has experienced negative cash flows in the past. Sustained negative cash flows could undermine its ability to meet operational and financial obligations.
- Given the company’s reliance on gold as collateral, there is a risk that the pledged gold may not fetch its full value in case of recovery, potentially leading to losses.
- Investing in NBFC NCD bonds turned riskier in the past as there were defaults and delays in the payment of interest and repayment of capital by several NBFC companies. Investors should go through Muthoot Mercantile NCD Jan-25 RHP for all risk factors.
Muthoot Mercantile NCD Jan-2025 – Should you invest or avoid?
Muthoot Mercantile Ltd is an NBFC engaged in lending loans against Gold, Investments, Health Insurance, Forex Services, and Money Transfer. Its Jan-2025 NCD issue comes with attractive interest rates. The company has consistent growth in margins. In this issue, they are offering secured NCDs, which are somewhat safer compared to unsecured NCDs.
On the negative side, the company has a low credit rating of IND/BBB Stable from India Ratings. The company derives the majority of its revenues from 3 states, posing a regional risk. Investors should not forget about NCD defaults and delays in the payment of interest/principal from NBFC companies in the past.
Investors need to review both pros and cons before investing in such NCD bonds.
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