Published on Sunday, August 6, 2017 by Dilip Davda
Kosamattam Finance Ltd (KFL) a frequent visitor to the capital market for debt funds is once again entering the debt market with its 11th NCD offer. The company is a systemically important non-deposit taking NBFC primarily engaged in the Gold Loan business, lending money against the pledge of household Jewellery ("Gold Loans") in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry. Further the company also has a Full Fledged Money Changers ("FFMC"). KFL is also registered as Depository Participant, Corporate Insurance Agency and Mutual Fund Advisor.
KFLâ€™s Gold Loan portfolio as for the financial years ending on March 31, 2017, March 2016 and March 31, 2015 comprised of 5,57,478, 4,79,540 and 4,47,389 gold loan accounts, aggregating to Rs. 1730.10 cr., Rs. 1312.24 cr. and Rs. 1136.92 cr. This is 90.03%, 89.12% and 94.89% of its total loans portfolio as on those dates. As on June 30, 2017, the company had a network of 888 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry and employ 2,912 persons in its business operations. Thus its branch and employee count has declined.
For the purpose of onward lending and for repayment of interest and principal of existing loans it is coming out with a Secured, Redeemable NCDs (of Rs. 1000 each) issue of Rs. 220 crore. The base amount is Rs. 110 crore and the green shoe option is Rs. 110 crore. The company offers coupon rates ranging from 9.25 per cent to 10.00 per cent depending upon tenure of 400 days, 18 months, 36 months, 52 months, 60 months and 88 months NCDs. NCDs are available in demat and physical mode, however, trading will take place only in demat mode. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiple of 1 NCD thereon, thereafter. Interest will be paid on cumulative / monthly basis as per the choice of investors. Issue has already opened for subscription on 04.08.17 and will close on or before 01.09.2017. Post allotment, NCDs will be listed on BSE. Post issue KFLâ€™s debt equity ratio will stand enhanced from 9.23 per cent to 10.31 per cent. As on 31.03.17, its net NPAs stood at 0.27% against 0.20% for a year ago period.
On performance font, for the financial years ended March 31, 2017, March 31, 2016, March 31, 2015, March 31, 2014 and March 31, 2013 KFLâ€™s total income was Rs. 3522.52 cr. Rs. 3457.00 cr. Rs. 2575.44 cr. and Rs. 2357.99 cr. respectively. Profit after tax for the said fiscals was Rs. 156.83 cr., Rs. 112.29 cr., Rs. 52.82 cr., Rs. 26.45 cr. and Rs. 39.28 cr. respectively. For the said periods revenues from our Gold Loan business constituted 91.62%, 93.34%, 96.43%, 96.67% and 97.52%, of its total income.
These NCD issue is graded IND BBB- by India Rating (indicating 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). Sole Lead manager to the issue is Vivro Financial Services Pvt Ltd and Vistra ITCL (India) Ltd is the Debenture Trustee. Karvy Computershare Pvt Ltd is the registrar to the issue.
Conclusion: Offers with "BBB-" ratings is indicating moderate risk of servicing as well as credit risk. However, risk savvy investors may consider moderate investment for long term.
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. 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 new papers.
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