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M & M Financial NCD issue review

Posted on Thursday, July 6, 2017

M & M Financial NCD issue review

Mahindra & Mahindra Financial Services Ltd (MMFSL) is one of India's leading non-banking finance companies focused on customers primarily in the rural and semi-urban sector of India with over two decades of existance. The company is primarily in the business of financing purchase of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles, construction equipments and SME financing. MMFSL is also engaged in personal loans/gold loans, insurance broking, housing finance and Mutual Fund/AMC. It has 1,182 offices covering 27 states and 4 union territories in India, as of March 31, 2017. Parent company has 51.20% holding in this arm.

It came with its maiden debt offer in May 2016 and is now coming out with a second such offer to mobilize Rs. 250 crore with an option to retain oversubscription upto shelf limit of Rs. 2000 crore. Issue opens for subscription o n 10.07.17 and will close on or before 28.07.17 depending on early subscription. First issue was for half of current issue and was oversubscribed several times.

Under the current offer, the company is offering Unsecured Subordinated Redeemable Non Convertible Debentures having a face value of Rs. 1000 each. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (Rs. 1000), thereon, thereafter. Issue is being made on “First come - First Served” basis and allotment will be done only in demat mode. MMFSL has reserved 20% for QIBs, 10% for Corporates and 35% each for HNIs and Retail category. NCDs have tenure of 7, 10 and 15 years with annual interest payment. For the said tenures, it offers 7.75%, 7.90% and 7.95% for QIBs and Corporate and 7.85%, 8.00% and 8.05% for HNIs and Retail categories respectively. For 15 years tenure, the company may exercise Call Option after 10 years. MMFSL enjoys cost-effective debt financing due to its strong brand equity, stable credit history, superior credit ratings and conservative risk management policies. It is playing vital role in transformation of rural lives across the nation.

For last three fiscals, MMFSL has posted total income/net profits of Rs. 5536.10 cr. / Rs. 831.80 cr. (FY15), Rs. 5853.20 cr. / Rs. 672.60 cr. (FY16) and Rs. 6173.90 cr. / Rs. 400.20 cr. (FY17). While its top line has seen rising trends, its bottom line has shown declining trends, which is attributed to higher provisioning and write offs.

This offer is rated 'IND AAA' / Outlook Stable' for an amount of Rs. 2000 crore, by India Ratings & Research Private Limited "India Rating" and 'BWR AAA, Outlook: Stable' by Brickwork Ratings India Private Limited. The rating of NCDs by India Ratings and BWR indicate that instruments with this rating are considered to have highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk. The NCDs offered through this Tranche 1 Prospectus are proposed to be listed on the BSE Limited.

Issue is jointly lead managed by Edelweiss Financial Services Limited, Axis Bank Limited, A. K. Capital Services Limited, Trust Investment Advisors Private Limited and Yes Securities (India) Limited. Axis Trustee Services Limited is the Debenture Trustee, while Karvy Computershare Private Limited is the Registrar to the Issue.

Conclusion: Investors looking for steady interest income may consider for long term investment in this attractive offer.

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About 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. 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 (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.


User Comment

2. SANYAM  Jul 7, 2017 5:23:53 PM IST Reply
I agree. Not so great offer. Better options are available.
1. UnderRighter  Jul 7, 2017 2:04:49 AM IST Reply
how is this an attractive investment with such low interest rates and an unsecured instrument?

RBI bonds with 8% semi-annual interest rates with 6 years maturity is way better than this....
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