Muthoot finance NCD’s subscription would open for subscription next week i.e. 4th April, 2016. It is issuing secured and un-secured NCD’s in this current issue. The yield rates are as high as 9.67% per annum. I have been providing provided my analysis earlier several times on Muthoot Finance NCD’s, however, I would cover some important key points here in this article. Should you invest in Muthoot Finance NCD of Apri-2016?
About Muthoot Finance Limited
Muthoot Finance is largest gold loan company in India in terms of loan portfolio and branch network. It has already issued several NCD’s in the past in the form of secured and unsecured NCD’s.
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Muthoot Finance NCD April-2016
Muthoot Finance is issuing secured and un-secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 250 Crores with an option to retain another Rs 250 Crores over ssubscription totaling to Rs 500 Crores. It comes with 11 different options, which contains 400 days to 90 month tenure. The earlier issue of NCD, it had highest tenure of 81 months.
The Muthoot Finance issue contains 11 options of NCD’s and 1 to 10 are secured and 11th option is unsecured.
a) About Muthoot Finance Secured NCD of April-2016
For secured NCD’s the assets are backed up for principal and interest. In case of anything happening to companies, investors of NCD would still get their principal investment and interest.
b) About Muthoot Finance Unsecured NCD’s of April-2016
For un-secured NCD the assets are NOT backed up for principal and interest. In case something happens to company performance and company is closed, investors would be given normal preference in repayment of capital and interest.
Features of Muthoot Finance NCD of April-2016
- Issue start date: 4-April-2016
- Issue end date: 3-May-2016
- NCD’s are available in eleven different options.
- Interest payable monthly, annual and cumulative, depending on the option of NCD.
- The face value of the NCD bond is Rs 1,000.
- Minimum investment is for 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 NCD bonds would be listed on BSE. Hence, these are liquid investments.
- Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
- ICRA has given a rating of ICRA AA-/Stable which indicates a high degree of safety for payment of principal and interest (Letter dated 1st February, , 2016).
- The prospectus can be downloaded from the SEBI website at this link
Here are the interest rates on the April-2016 NCD’s of Muthoot Finance
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How is the company doing in terms of Financials?
- Revenues of the company have declined from Rs Rs 4,947 Crores (FY 2013-14) to Rs 4,324 Crores (FY 2014-15) indicating negative growth of 12.5%.
- Profits have reduced from Rs 780 Crores (FY 2013-14) to Rs 670 Crores (FY 2014-15) indicating a negative growth of 14%.
- Gross Non Performing Assets (NPA) of the company is 1.9% (FY2013-14) Vs 2.19% (FY 2014-15).
Why to invest?
- Largest gold loan financing company
- It offers secure NCD’s also where your money is safe. Means in case of anything happening to the company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
- Attractive interest rates between 9.25% to 9.67% per annum
- You can double your money in 90 months (7 years, 6 months)
Why not to invest?
- Revenues are in declining mode.
- Profits are shrinking. It has seen 14% negative growth. Reduction in profits can lead to delay in interest payment.
- Increase in NPA’s in the last couple of years is a major concern.
- Gold finance companies are riskier. Decline in gold prices (which happened last year), can pose high risk to such business.
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How to apply?
If you have demat account, you can apply through your demat broker online. These can be easily sold at later point of time if you can take them in demat form, however you can sell at market price only. You can also apply in physical form by visiting the company website and downloading the application form and preparing the cheque and submitting at collection centres.
Conclusion: As indicated in my previous articles about Muthoot Finance NCD’s, while I am interested to get higher interest, I am equally interested to protect my investment. I would not look for any unsecured NCD’s. My view has always been negative on this company NCD’s. Reducing profits in the last few years poses high risk and this could delay your interest payments. High risk takers can invest in the secured NCD (Option XI), however, should consider the negative points and risk factors indicated above.
Readers, have you investing in any NCD’s these days? What are your experiences on this?
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Muthooth Finance NCD – Apr 2016
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I want to invest Rs 50 lacs in secured bonds,please guide me
If i bought NCD having coupen rate 10%,record date of 31 aug 2016 having annual payout on 10th
august 2016 at 1018,Will i got full year interest payment of Rs 100 or i got interest for just 20
days. If i got full year interset then paying Rs18 extra to buy ncd having 10% coupen rate is
worth buying. so plz help me in this regard and solve my problem.
Jitesh, For annual interest pay out, it is pay out date. If you buy before pay-out date, you would get full year interest. Hence you would see that NCD bonds in open market are above Rs 1,000 as interest amount is calculated by investors and then try to invest at higher bond price.
you have written that Muthooth NCD are secured i.e. in case company closes we will get principal with interest. But you are not recommending to have these NCD’s …it is only for Highrisk takers.
Now this is a bit confusing……. What is the harm if a senior citizen like me should buy this as it gives higher return. What is the harm if we get late interest say after six months or so.
As I am new can you please elaborate more.
Thanks and regards.
Hi Joshi, The risk is delay in payment of interest and repayment of principal. If you are retired, it is high risk for you as interest payment could be delayed and even principal amount too.
If choosing a secured NCD which one will provide the best output ?
V – Secured with 9.75 %
Can you please tell is it advisable to buy new NCD or already listed NCD (which are listed at good price) ?
Buying NCD in IPO wont have any broker charge ,But if you buy from secondary market then you need to pay the brokerage .For icici its 0.75% and other charges .