Mahindra and Mahindra Fin Jan.19 Tranche I NCD offer review (May apply)

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•    MMFSL is a Mahindra group finance sector arm.
•    This is the third debt offer from it since June 2016.
•    CARE and India Rating has rated this offer as AAA/Stable.
•    Investment for long term may be considered as it has good rating.

ABOUT COMPANY:
Mahindra & Mahindra Financial Services Ltd. (MMFSL) is one of the leading non-banking finance companies with customers primarily in the rural and semi-urban markets of India. It is primarily engaged in providing financing for new and pre-owned auto and utility vehicles, tractors, cars and commercial vehicles. The company also provides housing finance; manage mutual funds, personal loans, financing to small and medium enterprises, insurance broking and mutual fund distribution services. In addition, it provides wholesale inventory financing to dealers and retail financing to customers in the United States for purchase of Mahindra tractors through Mahindra Finance USA LLC (MF USA), its joint venture with De Lage Landen Financial Services Inc., which is a member of the Rabobank Group. MMFSL is a part of the Mahindra group, which is one of the largest business conglomerates in India.

DEBT OFFER DETALS:
For the purpose of onward lending, financing, refinancing the existing indebtness and long term working capital needs (75% of fund mobilized) as well as general corpus fund need (25% of fund mobilized), MMFSL is coming out with debt offer of Secured and/or Unsecured subordinated Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 500 crore with a green shoe option to retain oversubscription to the tune of Rs. 3000 crore making the total issue size of Rs. 3500 crore. Out of this Tranche-I issue Rs.2500 crore will be secured instruments and Rs. 1000 crore will be unsecured one. MMFSL has overall self limit of Rs. 10000 crore worth of debt issue.  

Issue opens for subscription on 04.01.2019 and will close on or before 25.01.19. 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. Allotment will be done on 'First come-first served' basis. Application is to be made in ASBA mode only.  This is the 3rd debt offer from the company since June 2016.

This issue is rated as CARE AAA/Stable by Credit Analysis & Research Ltd. and IND AAA/Stable by India Ratings. This rating indicates that instruments with such ratings are considered to have highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.

Issue is jointly lead managed by Edelweiss Financial Services Ltd., A K Capital Services Ltd., Axis Bank Ltd., ICICI Securities Ltd., SBI Capital Markets Ltd., Trust Investment Advisors Pvt. Ltd. and Yes Securities Ltd. While Axis Trustee Services Ltd. is the debenture trustee Karvy Fintech Pvt. Ltd. is the registrar to the issue.

These NCDs have tenures of 39 months, 60 months, 96 months and 120 months (unsecured).  It offers coupon rates ranging from 9.00% to 9.50% based on selection of investors. Frequency of interest payments will be annually only. Allotment of these NCDs will be in dematerialized mode only. There is no put and call options.

FINANCIAL DATA:
MMFSL has (on a consolidated basis) posted total revenue and net profits of Rs.5939.03 cr. / Rs. 772.29 cr. (FY16), Rs. 6550.29 cr. / Rs. 511.64 cr. (FY17) and Rs. 7772.74 cr. / Rs. 1023.91 cr. (FY18). For first half of FY19 it has earned net profit of Rs. 650.44 cr. on total revenue of Rs. 3995.50 cr. Thus is has shown upside movement in top lines and bottom lines from FY17 onwards. Its Net NPAs stood at 3.20%, 3.60% and 3.80% for FY16 to FY18 respectively and was 6.00% for the H1 of FY19 ended on 30.09.18. Its total debt equity ratio as of 30.09.18 of 4.66 will rise to 5.66 post this issue.

Conclusion / Investment Strategy

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

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