Muthoot Fincorp Sept 2019 NCD offer review (May apply)

This is the 4^th debt offer from this company since July 2014.
Issue is rated as BWR/A+ (Stable) by Brickwork Ratings.
Coupon rates are attractive considering falling interest rate regime.
Moderate investment may be considered.

About Company:

Muthoot Fincorp Ltd. (MFL) is a non-deposit taking, systemically important NBFC registered with the RBI bearing registration no. 16.00170 dated July 23, 2002 under Section 45 IA of the RBI Act. The Company is one of the largest Indian NBFCs engaged primarily in the business of providing personal and business loans secured by gold jewellery and ornaments ('Gold loans')

MFL's Gold loan products are structured to serve the business and personal purposes of individuals who do not have ready or timely access to formal credit or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. The Gold loan portfolio of the Company as of June 30, 2019 comprised approximately 28.50 Lakhs loan accounts that were serviced through 3,551 branches located across 19 states, union territory of Andaman and Nicobar Islands and the national capital territory of Delhi. As of June 30, 2019, MFL employed 16,923 employees including 356 contracted experts in its operations.

In addition to the Gold loan business, the Company provides foreign exchange conversion and money transfer services as sub-agents of various registered money transfer agencies. It is also engaged in wind energy as well as real estate business through joint ventures. For Real estate business, it is exploring its own land bank.

Offer Details:

MFL is coming out with its Secured Redeemable Non-Convertible debentures of Rs. 1000 each for a base amount of Rs. 250 cr. It has green shoe option to retain oversubscription of Rs.250 cr. thus making the overall size of the offer Rs. 500 cr. Issue opens for subscription on 20.09.19 and will close on or before 18.10.19. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiple of 1 NCD (Rs. 1000) thereon, thereafter. Post allotment NCDs will be listed on BSE. Application to be made only by ASBA mode and allotment will be in demat mode only. MFL will spend Rs. 6.40 cr. for the proceeds of the entire amount of Rs. 500 cr. Out of the available net proceeds 75% will be used for working capital and the balance for general corporate purpose.

This is the 4^th debt offer from the company since July 2014. Earlier three offers came in July 2014, September 2014 and September 2015.

This offer has tenures of 400 days, 24 months and 36 months. It offers coupon rates ranging from 9.00% to 10% depending on the options applied for. Interest payment will be either Monthly, Yearly or Cumulative as per the choice of investors.

Issue is solely lead managed by SMC Capitals Ltd. while Integrated Registry Management Services Pvt. Ltd. is the registrar to the issue and Catalyst Trusteeship Ltd. is the Debenture Trustee.

Terms and conditions in connection with Secured NCDsSeries	I	II	III	IV	V	VI	VII	VIII
Frequency of Interest Payment	Monthly	Monthly	Monthly	Annual	Annual	Cumulative	Cumulative	Cumulative
Minimum Application	Rs 10,000 (10 NCDs)
In multiples of thereafter	Rs 1,000 (1 NCD)
Face Value of Secured NCDs (Rs / NCD)	Rs 1,000
Issue Price (Rs / NCD)	Rs 1,000
Tenor from Deemed Date of Allotment	400 days	24 months	36 months	24 months	36 months	400 days	24 months	36 months
Coupon Rate (% per annum)	9%	9.25%	9.50%	9.50%	10%	9.25%	9.5%	10%
Effective Yield (Per annum)	9.38%	9.65%	9.92%	9.50%	10%	9.30%	9.95%	11.03%
Mode of Interest Payment	Through various options available
Redemption Amount (Rs / NCD****	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,102	Rs 1,199	Rs 1,331
Nature of indebtedness	Secured rated listed non-convertible debentures
Put and Call Options	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.
Deemed Date of Allotment	The date on which the Board or the Debenture Committee approves the Allotment of NCDs. All benefits relating to the NCDs including interest on the NCDs shall be available to the Investors from the Deemed Date of Allotment. The actual Allotment of NCDs may take place on a date other than the Deemed Date of Allotment

Issue Ratings:

This offer is rated as BWR/A+ (Stable) by Brickwork Ratings. This rating indicates that instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.

Financial Performance:

On financial performance front, MFL has (on a consolidated basis) posted total revenue/net profits of Rs. 2657.39 cr. / Rs. 119.90 cr. (FY18) and Rs. 3353.76 cr. / Rs. 372.61 cr. (FY19). As on 31.03.19 it's paid up equity capital of Rs. 193.70 cr. is supported by free reserves of Rs. 2094 cr. Its NPAs stood at 2.33% as on 31.3.19 against 1.45% for a year ago period. Post issue its current debt equity ratio of 3.72 will stand enhanced to 3.88.

Conclusion:

Coupon rates are attractive with A+ (Stable) rating amidst falling interest scenario. Currently many debt offers are being reated and recent offers are receiving lukewarm response. Considering these, investors looking at steady returns may consider moderate investment for long term. (Subscribe for long term).

Conclusion / Investment Strategy

Coupon rates are attractive with A+ (Stable) rating amidst falling interest scenario. Currently many debt offers are being re-rated and recent offers are receiving lukewarm response. Considering these, investors looking at steady returns may consider moderate investment for long term. (Subscribe for long term).

Review By Dilip Davda on September 19, 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 Muthoot Fincorp Limited NCD Sept 2019 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Muthoot Fincorp Limited NCD Sept 2019 worth investing. The Muthoot Fincorp Limited NCD Sept 2019 Note sets the NCD expectations in systematic way which tells you if Muthoot Fincorp Limited NCD Sept 2019 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Fincorp Limited NCD Sept 2019 by providing NCD recommendations i.e. subscribe, avoid and neutral.

Muthoot Fincorp Sept 2019 NCD offer review (May apply)

Conclusion / Investment Strategy

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