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Chemmanur Credits Dec 22 NCD issue review (Avoid)

Chemmanur Credits and Investments Limited Logo

•    This is the maiden debt offer from this financial service segment company. 
•    Instrument rated as CRISIL BBB -/stable outlook by CRISL, which is considered a bit risky.
•    Perhaps due to a below-average rating, it is offering lucrative coupon rates.
•    There is no harm in skipping this a bit risky debt offer.

ABOUT COMPANY:
Chemmanur Credits and Investments Ltd. (CCIL) is a part of Boby Chemmanur Group which is engaged in a diverse range of businesses and is based in Kerala, India. The group has retail gold jewellery showrooms in the USA and the Middle East apart from those in India. Currently, it offers various Gold Loan schemes to suit the individual needs of customers. CCIL offers Gold Loans for tenure ranging up to 180 days. The schemes differ in relation to interest rate chargeable, the amount advanced per gram of gold, tenure, and amount of loan. It also offers business loans under "Gramin Shakti Loan", thus serving small-scale business segments.

The company is primarily engaged in the gold loan sector lending money against the pledge of household gold jewellery ("Gold Loans") in the state of Kerala, Tamil Nadu, and Karnataka. It also provides Microfinance Loans, business and personal loans, money transfer services, and the distribution of third-party insurance products. It has been engaged in the lending business for more than 11 years and is based in Kerala, India. As of September 30, 2022, it operated through 161 branches located across 3 states namely Kerala, Tamil Nadu & Karnataka, and employs 881 persons in business operations.

DEBT OFFER DETAILS:
For the purpose of onward lending and repayment of interest and principal of existing loans (at least 75%) as well as general corpus fund need (maximum up to 25%), CCIL is coming out with its maiden debt offer of Secured Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 50.00 crores with a green shoe option to retain oversubscription to the tune of Rs. 50.00 crores making the total issue size of Rs. 100.00 crores. The issue is opening for subscription on December 14, 2022, and will close on or before January 06, 2023. 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. Post allotment, NCDs will be listed on BSE. It will spend Rs. 1.89 cr. for this entire issue proceeds.

These NCDs have tenures of 366 days, 18 months, 24 months, 36 months, 60 months, and 74 months. It offers coupon rates ranging from 9.50% to 11.50% based on the selection of investors. The frequency of interest payments will be Monthly or cumulative as per the choice of investors. Allotment of these NCDs will be in dematerialized mode only. Application is to be made through ASBA mode only. 

CREDIT RATINGS:
This issue is rated as CRISIL BBB - / Stable, (pronounced as CRISIL triple B minus rating with Stable outlook), this rating indicates that instruments with this rating are considered to have a moderate degree of safety regarding the timely servicing of financial obligations and carry moderate credit risk. 

This rating is not a recommendation to buy, sell or hold securities and investors should take their own decisions. The rating provided by the rating agency may be suspended, withdrawn, or revised at any time by the assigning rating agency on the basis of new information, etc., and should be evaluated accordingly.

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd. while KFin Technologies Pvt. Ltd. is the registrar of the issue. Mitcon Credentia Trusteeship Services Ltd. is the debenture trustee. 

FINANCIAL DATA:
For the last three fiscals, the company has posted total income/net profits of Rs. 72.01 cr. / Rs. 8.50 cr. (FY20), Rs. 74.74 cr. / Rs. 9.24 cr. (FY21), and Rs. 73.33 cr. / Rs. 4.31 cr. (FY22). For Q1 of FY23, it earned a net profit of Rs. 0.52 cr. on a turnover of Rs. 18.20 cr. Thus it has shown declining trends in its top and bottom lines for the last 15 months. 

CCIL's net NPAs have grown from 0.18% for FY20 to 0.86% for FY22. As of June 30, 2022, while its net NPA stood at 0.70%, it's current paid-up equity capital of Rs. 88.57 cr. is supported by free reserves of Rs. 389.12 cr. Its debt-equity ratio of 2.89 as of June 30, 2022, will rise to 4.02 post this debt issue.  


Conclusion / Investment Strategy

The company is in the gold loan sector offering lucrative coupon rates perhaps due to a below-average rating. Its margins have shown declining trends with a static top line. There is no harm in skipping this a bit risky debt issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Dec 13, 2022

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 before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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 Chemmanur Credits and Investments NCD Dec 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Chemmanur Credits and Investments NCD Dec 2022 worth investing. The Chemmanur Credits and Investments NCD Dec 2022 Note sets the NCD expectations in systematic way which tells you if Chemmanur Credits and Investments NCD Dec 2022 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Chemmanur Credits and Investments NCD Dec 2022 by providing NCD recommendations i.e. subscribe, avoid and neutral.


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