Muthoottu Mini NCD – (XIII) - Jan. 2021 offer review (May apply)

MMFL is a Muthoottu Mini group arm engaged in gold loan and other financial services.
This is the 13^th offer from this company since February 2014.
This issue is coming within 45 days of previous debt offer.
Issue rated as IND BBB/Stable. Such rating indicates moderate risk in servicing.

About Company

Muthoottu Mini Financiers Ltd. (MMFL) a Muthoottu Mini group company is a non-deposit taking systemically important NBFC in the gold loan sector lending money against the pledge of household gold jewellery ('Gold Loans') in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Haryana, Maharashtra, Delhi and Goa and the union territory of Puducherry. It has also recently forayed into microfinance loan segment in financial year 2017 wherein the company provides unsecured loans to joint liability group of women customers (minimum of 5 persons) who require funds to carry out their business activities through few of its branches in the state of Kerala. Since FY14 this is the 13^th debt offer from this company. This issue is coming within 45 days of previous offer that closed on November 18, 2020.

As on September 30,, 2020, MMFL had a network of 792 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Haryana, Maharashtra, Delhi and Goa and the union territory of Puducherry and employed 3162 persons in business operations.

Issue Details

For the purpose of onward lending and for repayment of interest and principal of existing loans(75%) and also for general corporate fund needs (25%), MMFL is coming out with its debt offer of secured/unsecured, redeemable, non-convertible debentures of face value of Rs.1000 each. The company is issuing NCDs aggregating up to Rs. 125 crore with an option to retain oversubscription up to Rs. 125 crore thus making overall issue sizes of Rs. 250 crore. Issue opens for subscription on January 13, 2021, and will close on or before February 09, 2021. 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. MMFL is spending Rs. 3.50 cr. for mobilizing Rs. 200 cr.

This issue has tenure of 480 days, 24 months, 42 months, 66 months for secured NCDs and 61 months and 84 months for unsecured NCDs. It is offering coupon rates ranging from 9.25% to 10.25%. Interest payments mode is Monthly or Cumulative as per the choice of investors. Issue is to be applied via ASBA mode only and will be allotted in demat mode only.

Issue is rated IND BBB/Stable by India Ratings Ltd. It indicates that instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. Vivro Financial Services Pvt. Ltd. is the sole lead manager for this offer. Vistra ITCL (India) Ltd. is the debenture trustee while Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, NCDs will be listed on BSE.

Tenure	480 Days	24 months	24 months	42 months	66 months	61 months	84 months
Nature	Secured					Unsecured
Options	I	II	III	IV	V	VI	VII
Frequency of Interest Payment	Monthly	Monthly	Cumulative	Monthly	Cumulative	Monthly	Cumulative
Minimum Application	10 NCDs (Rs 10,000) (across all options of NCDs)
In multiples, of	1 NCD after the minimum application
Face Value of NCDs (Rs /NCD)	Rs 1,000
Issue Price (Rs /NCD)	Rs 1,000
Mode of Interest Payment/ Redemption	Through various options available
Coupon (%) per annum in Category I, II and III	9.25%	9.50%	NA	10.00%	NA	10.25%	NA
Redemption Amount (Rs /NCD) for NCD Holders in Category I, II and III	1,000	1,000	1,200	1,000	1,750	1,000	2,000
Effective Yield (%) (per annum)	9.65%	9.92%	9.54%	10.47%	10.71%	10.75%	10.41%
Put and Call Option	Not Applicable
Coupon Type	Fixed

Financial Performance

For the last three fiscals, MMFL has posted total income/net profit of Rs. 334.93 cr. / Rs. 14.25 cr. (FY18) and Rs. 298.15 cr. / Rs. 20.96 cr. (FY19) and Rs. 313.15 cr. / Rs. 33.54 cr. (FY20). For H1 of FY21 it has earned net profit of Rs. 19.46 cr. on total income of Rs. 171.01 cr.

As on September 30, 2020 its net NPA stood at 0.59%. As on September 30, 2020 it's paid up equity capital of Rs. 249.53 cr. is supported by free reserves of Rs. 241.46 cr.

Its current debt equity ratio of 3.74 (As on September 30, 2020) will stand enhanced to 4.25 post this issue.

Conclusion / Investment Strategy

Considering poor rating and average financial performance so far, there is no harm in giving this debt offer a miss. However, cash surplus/risk savvy investors may consider moderate investment as interest rates are lucrative amidst easing interest rate scenario. (Other).

Review By Dilip Davda on January 12, 2021

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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