Kosamattam Finance NCD review - May 2016 (Avoid)

Frequent visitor to debt market Kosamattam Finance Ltd (KFL) is once again coming out with its NCD offer to mobilize Rs. 125 crore with a green shoe option to retain oversubscription to the extent of Rs. 125 crore, making the aggregate size of the offer of Rs. 250 crore. Kosamattam Finance that is primarily engaged in Gold Loan business is now doing business in areas such as money transfer services, foreign currency exchange and air ticketing services.

To meet its working finance needs, the company is offering Secured Non-Convertible Debentures of face value of Rs. 1000 each. Issue has already opened for subscription on 02.05.16 and will close on or before 31.05.16. Issue is solely managed by Vivro Financial Services Pvt Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue and IL & FS Trust Co. Ltd is the debenture trustee. Issue is rated as CARE/BB+ by CARE that is indicating that instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations. Post allotment, NCDs will be listed on BSE. This issue is available in demat as well as in physical mode, however, trading will take place only in demat mode. Minimum application is to be made for 10 NCDs and in multiple of 1 NCD thereon, thereafter. NCDs have tenure of 400 days, 24 months, 36 months, 48 months and 78 months. Its coupon rates ranging from 9.75% to 11.15% giving yields ranging from 9.50% to 11.74% as per the option selected by the investors. Its current debt equity ratio of 8.07 will rise to 9.38 post this issue.

On performance front, for the nine month period ended on December 31, 2015 and for the Financial Years 2015, 2014, 2013, 2012 and 2011 Company's total income was Rs. 25,748.60 lacs, Rs. 25,754.43 lacs, Rs. 26,186.8 lacs, Rs. 23,579.87 lacs, Rs. 15,634.00 lacs and Rs. 7,481.50 lacs respectively. Itsr profit after tax for the nine month period ended on December 31, 2015 and for the Financial Years 2015, 2014, 2013, 2012 and 2011 was Rs. 810.40 lacs, Rs. 528.15 lacs, Rs. 2,644.64 lacs, Rs. 3,928.15 lacs, Rs. 3,861.52 lacs and Rs. 2,005.93 lacs respectively. For the nine month period ended on December 31, 2015 and for the Financial Years 2015, 2014, 2013, 2012 and 2011 revenues from KFL's Gold Loan business constituted 94.20%, 96.43%, 96.67%, 97.52%, 97.69% and 97.70%, respectively, of its total income. While its top line has been showing rise since 2011 to 2014, it witnessed fall in top as well as bottom line. The fall in bottom line was drastic.

On merchant banker's front, it has no track record on equity front since 2009 and has done mainly few debt offers in recent past as per details given on their web site. Vivro is a lesser known entity in primary market.

Conclusion / Investment Strategy

Considering poor rating, investors may give it a miss. However, as the company is having loyal investors base in southern regions, the issue might do well regionally.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on November 22, 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 Kosamattam Finance NCD May 2016 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 May 2016 worth investing. The Kosamattam Finance NCD May 2016 Note sets the NCD expectations in systematic way which tells you if Kosamattam Finance NCD May 2016 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Kosamattam Finance NCD May 2016 by providing NCD recommendations i.e. subscribe, avoid and neutral.

Kosamattam Finance NCD review - May 2016 (Avoid)

Conclusion / Investment Strategy

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