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JM Fin Prod Tranche-III NCD issue review (May apply)

JM Financial Products Ltd Logo
  • JMFPL is a NBFC arm of JM Finance group.

  • This is the third debt offer from this company since April 2019.

  • This issue is rated as ICRA AA/Stable and CRISIL AA/Stable.

  • Post allotment, NCDs will be listed on BSE.

About Company:

JM Financial Products Limited (JMFPL) is a 'Systemically Important Non - Deposit Taking NBFC' (NBFC-ND-SI) registered with the Reserve Bank of India and operates as the flagship company under the 'JM Financial' brand. Incorporated as J.M. Lease Consultants Private Limited on July 10, 1984. The Company has broadened its services from lease syndication and vehicle leasing to offering financial solutions through lending, syndication, participation in lending for securities issuance and distribution. Currently JMFPL has focused on offering a broad suite of secured and unsecured loan products which are customized to suit the needs of the corporates, SMEs and individuals. It broadly operates under four verticals viz. (i) fixed income division (structured financing) ('FID (structured financing)'); (ii) fixed income division (real estate financing) ('FID (real estate financing)'); (iii) capital market financing; and (iv) SME financing.

The company also offers unsecured loans to customers on the basis of their creditworthiness. The purpose of funds could be for the purpose of working capital requirement for business and/ or for purposes acceptable to the Company. In addition JMFPL has ventured into real estate broking business under the brand name 'Dwello'. Through Dwello, it operates primarily in the residential real estate segment and assists buyers during all the stages of their real estate buying cycle. Further, it has entered in the housing finance business through Subsidiary, JMFHL. The focus of housing finance business would be to provide home loans to retail customer with a focus on affordable housing segment.

Issue Details:

For the purpose of onward lending, financing and for repayment/prepayment of interest and/or principal of borrowings of the company (75%), General corpus funds (25%) of the funds mobilized, the company is coming up with an issue of Secured Redeemable Non-Convertible Debentures ('NCDs') of the face-value of Rs 1000 each. The NCD Issue aggregates to Rs 100 crore, with an option to retain over-subscription up to Rs 200 crore for issuance of additional NCDs, aggregating up to a total of Rs 300 crore.

The NCD Issue opens on 13th February 2020, and will close on or before 9th March 2020. The company has a shelf limit of Rs 2000 crore. 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. The NCDs to be issued have been rated 'ICRA AA stable and CRISIL AA/Stable. The rating of NCDs indicates high degree of safety regarding timely servicing of financial obligations.

The Secured NCDs offered through the issue are proposed to be listed on the BSE. The issue is jointly managed by A K Capital Services Ltd., JM Financial Ltd. and Trust Investment Advisors Pvt. Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue. IDBI Trusteeship Services Ltd.; is the Debenture Trustee. The company will spend Rs 11.70 cr. to mobilize Rs 300 cr.

This offer has tenures of 24 months, 40 months, 60 months and 120 months. It offers coupon rates ranging from 9.29% to 10.00% with interest payment options of Monthly, Annually and Cumulative as per the choice of investors.

Coupon rates for series 1 to 10

Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 Series 8 Series 9 Series 10
Frequency of Interest Payment Annually Cumulative Annually Cumulative Monthly Annually Cumulative Monthly Annually Monthly
Minimum Application Rs 10,000(10NCDs)
In multiple of thereafter Rs 1,000(1NCDs)
Face Value/Issue Price Rs 1,000
Nature Secured
Tenor 24 months 24 months 40 months 40 months 40 months 60 months 60 months 60 months 120 months 120 months
Coupon Rate 9.50% NA 9.70% NA 9.29% 9.90% NA 9.48% 10.00% 9.57%
Amount on Maturity Rs 1,000 Rs 1,199.02 Rs 1,000 Rs 1,361.28 Rs 1,000 Rs 1,000 Rs 1,603.20 Rs 1,000 Rs 1,000 Rs 1,000
Mode of Payment Through Various Options Available

Allotment will be made on 'First come - First served' basis. Application is to be made through ASBA mode only and allotment/trading will take place in demat mode only.

Financial Performance:

It recorded total income / net profits of Rs 949.38 cr. / Rs 204.30 cr. (FY19) and Rs 654.57 cr. / Rs 138.69 cr. for the first three quarter ended on 31.12.19. For the corresponding previous nine months period, it reported net profit of Rs 158.47 cr. on total income of Rs 730.24 cr. Thus on 3Qs basis, it has suffered a setback.

Company's aggregate loan book stood at Rs 5,226.6 crores (excluding impact of IND AS adjustments viz. interest accrued, expected credit loss and effective interest rate aggregating to Rs (6.0) crores) as of March 31, 2019 and Rs 4,137.2 crores (excluding impact of INDAS adjustments viz interest accrued, expected credit loss and effective interest rate aggregating to Rs (7.1) crores), as of December 31, 2019.

Gross NPAs and Net NPAs were Rs 3.7 crores and Rs 8.3 crores, Rs 3.3 crores and Rs 5.5 crores for Fiscal 2019 and for the nine month ended December 31, 2019, respectively. Gross NPAs were 0.1% and 0.2% of its gross loan book for Fiscal 2019 and as of December 31, 2019, while Net NPAs were 0.1% and 0.1% of loan book as of such dates. JMFPL's ROA and ROE was 3.1% and 3.1% and 13.5% and 11.4% for Fiscal 2019 and for the nine month period ended December 31, 2019 (on an annualized basis), respectively.

Its current debt equity ratio of 2.4 as on 31.12.19 will stand enhanced to 2.6 post this issue (based on Rs 300 crore total size).

The secured and unsecured outstanding borrowings of the Company as on December 31, 2019 stood at Rs 3896 cr.

Conclusion / Investment Strategy

Based on AA/Stable ratings from ICRA and CRISIL, coupon rates offered by the company are lucrative. However, setback for first three quarters performance on Y-o-Y basis raises concern. Investors looking for safe returns may consider investment for long term. (Subscribe for long term).

Review By Dilip Davda on February 12, 2020

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, 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.


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