Muthoot Mercantile NCD May-2024 – Issue Details and Review

Muthoot Mercantile NCD May-2024 – Introduction

Muthoot Mercantile Limited is coming up with secured NCD bonds that will open for subscription on May 6, 2024. 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 10.8%. This article will provide some insights into Muthoot Mercantile NCD for May-2024, including issue details, dates, and review.

About Muthoot Mercantile Limited

Muthoot Mercantile Limited is a non-deposit taking non-banking financial company registered with the RBI, primarily operating in the gold loan sector. Established in 1939, the company has a rich history rooted in small-scale money lending against household and used gold jewellery. Over 84 years, it has expanded its operations, with a focus on providing immediate funds to retail customers who lack access to formal credit. With 242 branches across nine states and union territories in India, including Kerala, Tamil Nadu, Maharashtra, and Delhi, the company serves as a crucial point of contact for loan origination, disbursement, and collection processes.

Headquartered in Kerala, Muthoot Mercantile Limited has evolved from its humble beginnings in Thiruvananthapuram to become a prominent player in the gold loan industry. As of December 31, 2023, the company’s Gold Loan portfolio constituted a significant portion of its total loans, with approximately 0.97 lakhs customers and a principal amount of ₹57,924.78 lakhs. The company has experienced steady growth in its Gold Loan portfolio, with a compound annual growth rate of 29.47% from Fiscal 2021 to December 31, 2023. Muthoot Mercantile Limited offers a range of Gold Loan schemes tailored to meet the diverse needs of its customers, who are primarily individuals from rural, semi-urban, and metro areas seeking funds for various purposes such as social obligations, emergencies, agriculture-related activities, small-scale business operations, or consumption purposes.

Muthoot Mercantile NCD May-2024 issue Details

Subscription opening Date 06-May-24
Subscription closure Date 17-May-24
Issuing Security Name Muthoot Mercantile Limited
Security Type Secured, Redeemable, Non-Convertible Debentures (Secured NCDs)
Issue Size (Base) Rs 50 Crores
Issue Size (Option to retain over subscription) Rs 50 Crores
Total issue size Rs 100 Crores
Issue price Rs 1,000 per bond
Face value Rs 1,000 per bond
Series Series I to XI
Minimum Lot size 10 bonds and 1 bond there after
Tenure 367days, 18, 24, 36, 60, 75 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 May-2024- Interest Rates

Series I II III IV V VI VII VIII IX X XI
Frequency of Interest Payment Monthly Cumulative Monthly Cumulative Monthly Cumulative Monthly Cumulative Monthly Cumulative Cumulative
Tenure (Months) 367 Days 367 Days 18 18 24 24 36 36 60 60 75
Coupon (% per Annum) 10.50% NA 10.50% NA 10.60% NA 10.75% NA 10.80% NA NA
Effective Yield (% per Annum) 11.02% 10.60% 11.02% 10.34% 11.13% 10.45% 11.30% 10.66% 11.35% 10.63% 11.73%
Amount on Maturity (In Rs.) 1,000.00 1,106.00 1,000.00 1,159.00 1,000.00 1,292.92 1,000.00 1,355.10 1,000.00 1,657.16 2,000.00

Financials of Muthoot Mercantile Limited

Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 31-Dec-23
Assets 316.2 420.4 606.5 818.0
Revenue 49.4 67.0 94.7 35.9
Profit After Tax 14.0 17.0 18.2 8.7
Net Worth 100.4 117.4 135.6 148.7

Muthoot Mercantile NCD May-2024 – 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 10.8%.
  • 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 May-2024 – Risk Factors

  • Company has a low credit rating of BBB/Stable from India Ratings and Research Limited.
  • The “Muthoot” mark has been registered as a trademark by M. Mathews, Chairman of the company. Furthermore, an application was filed by Thomas Muthoot, Thomas John Muthoot, and Thomas George Muthoot before the Intellectual Property Appellate Board, Chennai, on July 3, 2012, for the removal, expungement, rectification, cancellation, and variation of the trademark. Subsequently, the application was transferred to the Intellectual Property Division of the High Court of Judicature at Madras and is currently pending. Any damage to the brand or its reputation may adversely affect the company.
  • The company is subject to certain restrictive covenants in its loan documents and other debts, which may restrict its operations and ability to grow and may adversely affect its business.
  • Its ability to access capital also depends on its credit ratings. Any downgrade in its credit ratings would increase borrowing costs and constrain its access to capital and lending markets, thus negatively affecting net interest margin and business.
  • A part of its branch network is concentrated in Kerala and Maharashtra, and it derives the majority of its revenue from these states. Any breakdown of services in these areas could have a material and adverse effect on the company’s business.
  • Its business is capital-intensive, and any disruption or restrictions on raising financial resources could have a material adverse effect on its liquidity and financial condition.
  • 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 May-24 RHP for all risk factors.

Muthoot Mercantile NCD May-2024 – 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 May-2024 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 two 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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