Kosamattam Finance March 2020 NCD issue review (May apply)

KFL, a frequent visitor to debt market brings 19th debt offer since April 2014.
Instrument rated as IND/BBB Stable by India Ratings, which is considered a bit risky.
Offers lucrative coupon rates as its rating is poor.
Since last two debt offer KFL has changed merchant bankers.

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 19th Debt offer from the company since April 2014. It is an 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 December 31, 2019, it had a network of 944 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry and it employed 3436 persons in business operations. KFL belongs to the Kosamattam Group led by Mathew K. Cherian. with headquartered in Kottayam in the state of Kerala.

Debt Offer Details:

For the purpose of onward lending (45%) and repayment of interest and principal of existing loans (30%) 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 150 crore with a green shoe option to retain oversubscription to the tune of Rs 150 crore making the total issue size of Rs 300. Issue opens for subscription on 19.03.20 and will close on or before 15.04.20. 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 spendRs 1.60 cr. for this entire issue proceeds.

This issue is rated as IND BBB by India Ratings and Research 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 two 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 15 months, 21 months, 39 months, 48 months, 66 months and 84 months. It offers coupon rates of 9.50% 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.

Coupon Rates for Eash Series

�	Series 1	Series 2	Series 3	Series 4	Series 5	Series 6	Series 7	Series 8
Frequency of Interest Payment	Cumulative	Monthly	Monthly	Cumulative	Cumulative	Cumulative	Monthly	Cumulative
Minimum Application	Rs 10,000 (10 NCDs)
In Multiple of	1 NCD after minimum application
Face Value/ Issue Price	Rs 1,000
Tenor	15 Months	21 Months	39 Months	39 Months	48 Months	66 Months	84 Months	84 Months
Coupon Rate (Retail)	NA	9.75%	10%	NA	NA	NA	10.25%	NA
Amount on Maturity	Rs 1,120	Rs 1,000	Rs 1,000	Rs 1,385	Rs 1,500	Rs 1,750	Rs 1,000	Rs 2,000

Financial Data:

For the six-month period ending on September 30, 2019 and for the financial years ended March 31, 2019, March 31, 2018, March 31, 2017, March 31, 2016 and March 31, 2015 its total income was Rs 219.33 cr., Rs 468.38 cr., Rs 434.22 cr., Rs 360.31 cr., Rs 345.70 cr. and Rs 257.54 cr. respectively. KFL's profit after tax for the said periods was Rs 16.53 cr., Rs 30.42 cr., Rs 26.71 cr., Rs 15.74 cr., Rs 11.29 cr. and Rs 5.28 cr. respectively. Its gold loan business however reduced from 96.43% in FY 2015 to 91.60% in first half of FY20.

KFL's net NPAs for the first half of FY20, FY19, FY18 and FY17 were 0.98%, 1.28%, 0.59% and 0.27% respectively which are the major concerns. As on 31.12.19 its gold loan customers were 429979. Its current debt equity ratio of 7.16 will stand enhanced 7.94 post this issue. As on 30.09.19 it's paid up capital of Rs 191.60 cr. is supported by free reserves of Rs 193 cr.

Conclusion / Investment Strategy

Coupon rates offered are lucrative. But 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 March 18, 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 March 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 March 2020 worth investing. The Kosamattam Fin NCD March 2020 Note sets the NCD expectations in systematic way which tells you if Kosamattam Fin NCD March 2020 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Kosamattam Fin NCD March 2020 by providing NCD recommendations i.e. subscribe, avoid and neutral.

Kosamattam Finance March 2020 NCD issue review (May apply)

Coupon Rates for Eash Series

Conclusion / Investment Strategy

Review Author

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