Kosamattam Finance Dec. 2020 NCD issue review (May apply)

This is 21st debt offer since April 2014 from KFL.
Instrument rated as BWR BBB+/Stable outlook by Brickwork Ratings, which is considered a bit risky.
Offers lucrative coupon rates as has poor ratings.
Cash surplus/risk savvy investors may park their funds at their own risks.

ABOUT COMPANY

Kosamattam Finance Ltd. (KFL) is a systemically important non-deposit taking NBFC primarily engaged in the Gold Loan business, lending money against the pledge of household jewellery ('Gold Loans') in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry. This is the 21st Debt offer from the company since April 2014. It is IRDA registered composite corporate insurance agent. Kosamattam also holds SEBI registration as depository participant and FFMC to act as money changer. KFL is also an AMFI registered mutual fund advisor and also holds registration from LEIL.

In addition to the core business of Gold Loan, KFL also offer fee based ancillary services which includes

Microfinance, money transfer services, foreign currency exchange, power generation, agriculture and air

ticketing services. Thus it has diverse business activities now.

As on October 31, 2020 it had 946 branches in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Delhi, Gujarat and Maharashtra along with the union territory of Puducherry.

DEBT OFFER DETALS

For the purpose of onward lending (40%) and repayment of interest and principal of existing loans (35%) as well as general corpus fund need (25%), KFL is coming out with debt offer of Secured and Unsecured Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 175 crore with a green shoe option to retain oversubscription to the tune of Rs. 175 crore making the total issue size of Rs. 350. Issue opens for subscription on December 23, 2020 and will close on or before January 19, 2021. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE. It will spend Rs. 1.60 cr. for this entire issue proceeds.

This issue is rated as BWR BBB+ Outlook 'Stable', by Brickwork Ratings India Pvt. Ld. this rating indicates that instruments with such ratings are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. Since last four issues KFL is having mandate with Karvy Investor Services Ltd. and SMC Capitals Ltd. for the issue process. KFin Technologies Pvt. Ltd. is the registrar to the issue. Vistra ITCL (India) Ltd. is the debenture trustee.

These NCDs have tenures of 400 days, 30 months, 39 months, 48 months, 66 months and 84 months. It offers coupon rates of 9.25% to 10.25% based on selection of investors. Frequency of interest payments will be Monthly or cumulative as per the choice of investors. Allotment of these NCDs will be in dematerialized mode only. Application is to be made through ASBA mode only.

Kosamattam NCD December 2020 Coupon Rates

�	Series 1	Series 2	Series 3	Series 4	Series 5	Series 6	Series 7	Series 8
Frequency of Interest Payment	Cumulative	Monthly	Cumulative	Monthly	Cumulative	Cumulative	Monthly	Cumulative
Tenor	400 Days	30 Months	30 Months	39 Months	48 Months	66 Months	84 Months	84 Months
Coupon Rate (Retail)	NA	9.25%	NA	10%	NA	NA	10.25%	NA
Effective Yield (Per year)	8.50%	9.65%	9.34%	10.47%	10.67%	10.71%	10.75%	10.41%
Amount on Maturity	Rs 1,093.50	Rs 1,000	Rs 1,250	Rs 1,000	Rs 1,500	Rs 1,750	Rs 1,000	Rs 2,000

FINANCIAL DATA

For the fiscal year ended on March 31, 2020, KFL has posted total income/net profits of Rs. 498.49 cr. / Rs. 47.63 cr. (FY20). For first six months ended on September 30, 2020, it has reported net profit of Rs. 30.36 cr. on total income of Rs. 244.99 cr. Its current debt equity ratio of 6.10 will enhance to 6.78 post this issue.

KFL's AUM has consistently grown in the last 5 years from Rs 1,708 Crs in FY16 to Rs 2,973 Crs in FY20 at CAGR of 11.72%. As on 30 September 2020, the company's AUM stood at Rs. 2,978 crores

As on September 30, 2020, its gold loan customers were 598999, net NPAs stood at 0.97% and it's paid up capital of Rs. 198.01 cr. is supported by free reserves of Rs. 273.23 cr. Company's gold loan yield is expressing declining trend.

Conclusion / Investment Strategy

Although coupon rates offered are lucrative. It has poor rating (BBB) and the fancy of the group is limited to southern region only. Considering these, cash surplus risk savvy investors may consider investment in this debt offer on their own risk. (Others).

Review By Dilip Davda on December 21, 2020

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 Kosamattam Fin NCD December 2020 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Kosamattam Fin NCD December 2020 worth investing. The Kosamattam Fin NCD December 2020 Note sets the NCD expectations in systematic way which tells you if Kosamattam Fin NCD December 2020 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Kosamattam Fin NCD December 2020 by providing NCD recommendations i.e. subscribe, avoid and neutral.