Mahindra & Mahindra Financial Tranche I - NCD Offer Review

Published on Friday, May 20, 2016 by Dilip Davda

Mahindra & Mahindra Financial Services Ltd. (MMFSL) is a M & M group’s finance arm. It primarily focuses on providing financing for purchases of auto and utility vehicles, tractors, cars, commercial vehicles and construction equipments and pre-owned vehicles and others which accounted for 30.4%, 14.7%, 22.3%, 11.2% and 21.4% of estimated total value of the assets financed, respectively, for the year ended March 31, 2016. The company benefits from its close relationships with dealers and long-standing relationships with OEMs, which allows it to provide on-site financing at dealerships.

For the purpose of onward lending, financing, refinancing the existing indebtedness of our Company, long-term Working capital; and to raise General corporate purposes fund, the company is coming out with its maiden unsecured subordinated redeemable non-convertible debentures having a face value of Rs. 1000 each to mobilize Rs. 250 crore with a permission to retain oversubscription to the tune of Rs. 750 crore thus making an aggregate size of the issue for Rs. 1000 crore. Issue opens for subscription on 25.05.16 and will close on or before 10.06.16. Minimum application is to be made for 10 NCDs and in multiple of 1 NCD thereon, thereafter. Issue is available for allotment in demat as well as physical mode, however, trading will take place only in demat mode. NCDs have tenures of 66 months, 84 months and 120 months and offers coupon rates ranging from 8.34% to 8.8% for non-retail categories and 8.44% to 9% for retail category depending upon choice of the investors. Reservation in the issue is made for 20% for QIBs, 20% for Corporates, 30% for HNIs and 30% for retail investors. The NCDs proposed to be issued under this Issue have been rated “CARE AAA” by CARE and “IND AAA” by India Ratings. These rating indicate that instruments with this rating are considered to have highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk. Post allotment, NCDs will be listed on BSE. Its existing long term debt equity ratio of 4.12 will rise to 4.29 post this issue.

Issue is lead managed by ICICI Securities Limited, Edelweiss Financial Services Limited, A. K. Capital Services Limited, SBI Capital Markets Limited, JM Financial Institutional Securities Limited, Trust Investment Advisors Private Limited and Yes Securities (India) Limited. Axis Trustee Services Limited is the debenture trustee and Karvy Computershare Pvt Ltd is the registrar to the issue.

On performance front, the company has posted steady growth in top line for last six fiscals. However, it suffered a setback in bottom-line for the last fiscal 2015 due to higher provisions for finance cost and depreciation.

Conclusion: Considering good rating and the fancy for the group in the market, Investment may be considered for steady returns.