Muthoot Finance NCD Offer review Apr 2016

Published on Thursday, March 31, 2016 by Dilip Davda

A frequent visitor to debt market for raising funds via NCD offer Muthoot Finance Ltd (MFL) is again coming out with its 15th such offer. The company is offering Secured/Unsecured redeemable non-convertible debentures having face value of Rs. 1000 each to mobilize Rs. 250 crore. It has permission to retain oversubscription to the tune of Rs. 250 crore thus making the aggregate size of the issue of Rs. 500 crore.

MFL is the largest gold loan NBFC in India in terms of loan portfolio. It provides personal loans and business loans secured by gold jewellery, or Gold Loans, primarily to individuals who possess gold jewellery but are not able to access formal credit within a reasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. MFL'sr Gold Loan portfolio as of December 31, 2015 comprised approximately 6.90 million loan accounts in India that we serviced through 4,259 branches across 22 states, the national capital territory of Delhi and four union territories in India. As of December 31, 2015, it employed 23,070 persons in operations.

To meet its funding requirements the company is coming out with this offer that opens for subscription on 04.04.16 and will close on or before 03.05.16. The offer has coupon rates ranging from 8.25% to 9.75% and having interest payment options on monthly, annually and cumulative basis. It has tenures of 400 days, 18 months, 24 months, 36 months and 60 months. ICRA has rated this offer as ICRA AA-/Stable that indicates high degree of safety regarding timely servicing of financial obligations. Post allotment, it will be listed on BSE. Although allotment is available in demat as well as in physical mode, trading will take place only in demat mode. Issue is managed by ICICI Securities Ltd, Edelweiss Financial Services Ltd. Link Intime India Pvt Ltd is the registrar to the issue and IDBI Trusteeship Services Ltd is the debenture trustee. Its current debt equity ratio of 3.83 will rise to 3.93 post issue. With volatile movement in gold prices, this sector has suffered a lot in last two years.

Conclusion: The offer with average rating may be considered by investors having surplus funds for interest income.

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer. (Email: dilip_davda@rediffmail.com)