Muthoot Homefin (India) NCD Issue review (May apply)

•   A maiden debt issue from home finance arm of Muthoot group.
•   MCD issue is rated as CRISIL AA/Stable by CRISIL.
•   The company has posted growing top and bottom lines for the last three fiscals.
•   Investors looking for regular income may consider an investment for the long term.

ABOUT COMPANY:
Muthoot Homefin (India) Ltd.)MHIL) is a wholly owned arm of Muthoot Finance Ltd... It is a non-deposit taking housing finance company and was registered with the National Housing Bank ('NHB') on May 19, 2014. It currently boasts of a customer base consisting of 20,237 customers as of September 30, 2018. The company focuses on providing affordable housing loans to Lower Middle Income ('LMI') groups and Economically Weaker Sections ('EWS') of society in tier 2, tier 3 and tier 4 cities. Its customers comprise primarily informal and formally salaried workers and self-employed individuals. As on September 30, 2018, 58.88% of its loan portfolio consisted of loans made to salaried individuals, 2.26% of loan portfolio consisted of loans made to individuals who are professionals or self-employed and 38.87% of loan portfolio consisted of loans made to individuals who are businessmen.

As on September 30, 2018, it provided loans to customers located in 11 states and one union territory, namely Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Telangana, Uttar Pradesh, and Chandigarh. The company sources its customers directly through its in-house sales team, as well as through channel partner. MHIL's branch network consisted of 70, 59, 9, and 4 branches as on September 30, 2018, March 31, 2018, March 31, 2017, and March 31, 2016, respectively. It also leverages the brand recognition of MFL, in order to expand business and source customers.

Company's products are focused towards aiding customers in arranging funds for the purchase of a property, construction of new residential property, as well as for renovation, improvement and extension of existing residential property. These loan products are secured by creating a mortgage on the residential properties. In addition, the company also provides salaried customers with loans against property ('LAP') by allowing them to mortgage their property with it. As on September 30, 2018, the total LAP provided by it was valued at Rs 21.66 million and comprised of 0.12% of the total assets under management ('AUM').

ISSUE DETAILS:
The company is coming out with its maiden debt offer of Secured, Redeemable; Non-Convertible Debentures Rs. 150 crore with a green shoe option to retain oversubscription up to Rs. 150 crores, thus making the total issue size is Rs. 300 crore. The issue opens for subscription on 08.04.19 and will close on or before 07.05.19. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiples of 1 NCD ((Rs. 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE only.

The issue is solely lead managed by Edelweiss Financial Services Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Milestone Trusteeship Services Pvt. Ltd. is acting as the debenture trustee for this issue.

This issue is rated as CRISIL AA/Stable by CRISIL. The rating of AA/Stable indicates that instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

NCD is having a face value of Rs.1000 each. Interest payment options are Monthly, Annually and Cumulative as per the choice of the investors. The coupon rates for this issue ranging between 9.25% to 10%. Tenures for this NCD offer are of 24, 38, 60 and (for Series 10) 90 months. The application is to be made under ASBA mode only and allotment/trading will take place only in demat mode.

The object of this issue is to use the funds mobilized for the purpose of onward lending, financing, and for repayment/ prepayment of interest and principal of existing borrowings of the Company (up to 75%); and for General corporate purposes (25%).

FINANCIAL PERFORMANCE:
The company had 20,237, 15,908, 4,024 and 120 borrowers as at September 30, 2018, March 31, 2018, March 31, 2017, and March 31, 2016, respectively. Further, its AUM as at September 30, 2018, in accordance with Ind AS consisted of Rs. 1751 cr., and as at March 31, 2018, March 31, 2017, and March 31, 2016, in accordance with Indian GAAP, consisted of Rs. 1465 cr., Rs. 441 cr. and Rs. 32 cr., respectively. Its gross non-performing assets ('NPAs') as a percentage of AUM as at September 30, 2018, in accordance with Ind AS stood at 0.78%, and as at March 31, 2018, stood at 0.42%. Prior to this, the company has no NPAs. Its total borrowings as of September 30, 2018, were Rs. 1398 cr. Its average ticket size as on September 30, 2018, was Rs. 0.1 cr. and the average cost of borrowings as a percentage of weighted average borrowings was 8.64%. The average tenor of loans on the book as on September 30, 2018, was 17 years and four months.

MHIL's total revenue from operations, as per Reformatted Financial Statements prepared according to Indian GAAP for Fiscals 2018, 2017 and 2016 was Rs. 125.88 cr., Rs. 24.17 cr. and Rs. 1.93 cr. respectively, Net profit after tax, as per Reformatted Financial Statements prepared according to Indian GAAP for Fiscals 2018, 2017 and 2016 was Rs. 27.80 cr., Rs. 2.87 cr. and Rs. 0.001 cr. respectively. Post this issue, the company's current debt-equity ratio of 3.69 (as on 30.09.18) will stand enhanced to 4.48. For the period ended 30.09.18, the company has posted a net profit of Rs. 20.97 cr. on a total income of Rs. 103.98 cr.

Conclusion / Investment Strategy

This is the maiden offer from Muthoot Group's housing finance company. The issue is rated CRISIL AA/Stable. The company has posted growing income since inception. Investors looking for regular income may consider an investment for the long term.

Review By Dilip Davda on March 31, 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 Homefin NCD (March 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 Homefin NCD (March 2019) worth investing. The Muthoot Homefin NCD (March 2019) Note sets the NCD expectations in systematic way which tells you if Muthoot Homefin NCD (March 2019) good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Homefin NCD (March 2019) by providing NCD recommendations i.e. subscribe, avoid and neutral.

Muthoot Homefin (India) NCD Issue review (May apply)

Conclusion / Investment Strategy

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