Kosamattam Finance March-April 2022 NCD issue review (May apply)

This is 24^th debt offer since April 2014 from KFL.
Its last offer was in Aug-Sept 2021.
Instrument rated as IND BBB+/Stable outlook by India Ratings, which is considered a bit risky.
Offers lucrative coupon rates, but it 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 24^th 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. The last offer was in the month of August-September 2021.

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 January 31, 2022, it had a network of 990 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 employed 3338 persons in business operations. The company belongs to the Kosamattam Group led by Mathew K. Cherian with a headquartered in Kottayam in the state of Kerala.

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. 200 crores with a green shoe option to retain oversubscription to the tune of Rs. 200 crores making the total issue size of Rs. 400 crores. Issue opens for subscription on March 14, 2022, and will close on or before April 08, 2022. 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.

For this issue, the company has changed its rating agency. This issue is rated as IND BBB+ Outlook "Stable", by India Ratings I& 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. The issue is solely lead managed by SMC Capitals Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue. Vistra ITCL (India) Ltd. is the debenture trustee.

These NCDs have tenures of 18 months, 36 months, 42months, 54 months, 60 months and 88 months. It offers coupon rates of 8.75% to 10.00% 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.

FINANCIAL DATA:

For the last three fiscals, the company has posted total income/net profits of Rs. 475.29 cr. / Rs. 43.36 cr. (FY19), Rs. 499.23 cr. / Rs. 47.66 cr. (FY20) and Rs. 542.24 cr. / Rs. 65.25 cr. (FY21). Thus it has shown gradual growth in its top and bottom lines. For the first half of FY22 ended on September 30, 2021, it has earned net profit of Rs. 36.29 cr. on a total income of Rs. 299.53 cr. Thus it has been posting steady growth in its top and bottom lines.

KFL's net NPAs increased to 1.02% as of September 30, 2021 against 0.86% as of March 31, 2021. As of September 30, 2021, its current paid up equity capital of Rs. 203.58 cr. is supported by free reserves of Rs. 357.62 cr. Its debt equity ratio of 6.91 as of September 30, 2021 will rise to 7.62 post this debt issue.

Conclusion / Investment Strategy

The company is a frequent visitor of debt market. Although coupon rates offered are lucrative. It has poor rating (BBB+) and the fancy of the group is limited only to southern region. Considering all these, cash surplus risk savvy investors may consider investment in this debt offer on their own risk. (May Apply).

Review By Dilip Davda on March 12, 2022

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 Finance NCD Mar 2022 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 Finance NCD Mar 2022 worth investing. The Kosamattam Finance NCD Mar 2022 Note sets the NCD expectations in systematic way which tells you if Kosamattam Finance NCD Mar 2022 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Kosamattam Finance NCD Mar 2022 by providing NCD recommendations i.e. subscribe, avoid and neutral.

Kosamattam Finance March-April 2022 NCD issue review (May apply)

Conclusion / Investment Strategy

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