KLM Axiva NCD Tranche II (Aug 2019) offer review (May apply)

This is the second debt offer from KLM since September 2018.
CARE has assigned CARE/BB (Stable) rating to this offer
It offers attractive coupon rates
Risk savvy investors may consider on their own risk.

ABOUT COMPANY

KLM Axiva Finvest Ltd. (KLM) is a non-deposit taking and non- systemically important non-banking finance company ('NBFC') primarily serving low and middle income individuals and businesses that have limited or no access to formal banking and finance channels. The company had originally obtained a Certificate of Registration in the name of Needs Finvest Limited dated December 13, 1997 and subsequently, its name was changed to KLM Axiva Finvest Limited. It operates primarily in three business verticals: (i) gold loan business, lending money against the pledge of household jewellery, (ii) micro, small and medium enterprises loan, and (iii) personal loan. Further, as a part of offerings, it also provides microfinance loan to women customers and vehicle loan.

As on June 30, 2019, KLM operates through 125 branches across three states namely Kerala, Karnataka and Tamil Nadu managed by corporate office located at Kochi.

ISSUE DETAILS

To finance its onward lending (50%), repayment of interest and principal of existing loans (40%) and general corpus fund (10%) needs, KLM is coming out with its second debt offer for Rs 100 cr. via secured, redeemable non convertible debentures having a face value of Rs 1000 per NCD. It has green shoe option to retain oversubscription to the tune of Rs.25 crore, thus taking overall debt offer size to Rs 125 crore. KLM will spend Rs 1.26 crore for mobilizing the full amount of Rs 125 cr. and the rest will be used for the financial needs mentioned here above.

Minimum application is to be made for 5 NCDs (i.e. Rs 5000) and in multiple of 1 NCD (Rs 1000) thereon, thereafter. These instruments have tenure of 400 days, 2 yrs., 3 yrs. and 5 yrs. It has tenure of 45 months and 75 months additional series with cumulative interest options only. It offers coupon rates ranging from 11.00% to 12.00% and the interest payment mode available for Monthly, Annually or Cumulative, as per the choice of investors. This offer has lower coupon rates compared to its Tranche I offer. Allotment and trading will be done in demat mode only.

Terms of the NCDs
Tenure	400 Days	400 Days	2 Years	2 Years	3 Years	3 Years	5 Years	5 Years	45 Months	75 Months
Nature Options	I	II	III	IV	V	VI	VII	VIII	IX	X
Frequency of Interest Payment	Monthly	Cumulative	Monthly	Yearly	Monthly	Yearly	Monthly	Yearly	Cumulative	Cumulative
Minimum Application	Rs 5000 (5 NCDs)
In multiples of thereafter	1 NCD after minimum app
Face Value of Secured NCDs (Rs / NCD)	Rs 1,000
Issue Price (Rs / NCD)	Rs 1,000
Mode of Interest Payment	Through various options
Coupon Rate (% per annum)	11.00%	NA	11.25%	11.50%	11.50%	11.75%	11.75%	12.00%	NA	NA
Coupon Type	Fixed
Redemption Amount (Rs / NCD) for Debenture Holders*	Rs 1,000	Rs 1,123	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,500	Rs 2,000
Effective Yield (Per annum)	11.57%	11.17%	11.85%	11.50%	12.13%	11.75%	12.40%	12.00%	11.42%	11.73%
Deemed Date Of Allotment	The Date on which the Board of the Debenture Committee approves the allotment of NCDs. All benefits relating to the NCDs including interest on the NCDs shall be available to the investors from the Deemed date of allotment. The actual Allotment of NCDs may take place on a date other than the Deemed Date of Allotment.

NCD issue opens for subscription on 28.08.19 and will close on or before 26.09.19. Post allotment, listing will be done only on BSE. Issue is solely lead managed by Vivro Financial Services Pvt. Ltd. while Karvy Fintech Pvt. Ltd. is the registrar to the issue. Vistra ITCL (India) Pvt. Ltd. is the Debenture Trustee for the issue.

RATING OF INSTRUMENTS

These instruments are rated as CARE/BB+ (Stable) by CARE. The rating of NCDs by CARE indicates that instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.

FINANCIAL PERFORMANCE

On financial performance front, for last three fiscals, KLM has posted total income/net profits of Rs 23.94 cr. / Rs 2.13 cr. (FY17) and Rs 42.73 cr. / Rs 5.69cr. (FY18) and Rs 68.36 cr. / Rs 5.98 cr. (FY19).

As on 31.03.19, it's paid up equity capital of Rs 51.49 cr. is supported by free reserves of Rs 17.75 cr.

Its debt-equity ratio will stand enhanced from 4.84 at present to 6.64 post issue. As of March 31, 2019, March 31, 2018 and March 31, 2017, company's AUM was Rs 373.83 cr. Rs 194.23 cr. and Rs 91.36 cr. respectively, posting a CAGR of 102.29%.

However, its Net NPAs increased from 3.78% as on 31.03.17 to 4.47% as on 31.03.19.

MERCHANT BANKER'S TRACK RECORD

This merchant banker is a non regular player for primary markets. However, it has brought few debts and equity offers recently.

Conclusion / Investment Strategy

Although coupon rates are very attractive amidst lowering of interest rate scenario in general, considering poor rating, risk savvy cash surplus investors may consider parking of funds at their own risk. (Other).

Review By Dilip Davda on August 27, 2019

Review Author

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. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. 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.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The KLM Axiva Finvest NCD Aug 2019 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if KLM Axiva Finvest NCD Aug 2019 worth investing. The KLM Axiva Finvest NCD Aug 2019 Note sets the NCD expectations in systematic way which tells you if KLM Axiva Finvest NCD Aug 2019 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in KLM Axiva Finvest NCD Aug 2019 by providing NCD recommendations i.e. subscribe, avoid and neutral.