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KLM Axiva Sept-Oct. 21 NCD offer review (May apply)

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•    This is the 5th debt offer from KLMAFL since September 2018. 
•    Last debt offer was in July 2021. 
•    Its recent financial performance is listless.
•    CARE has given a BB+/Stable rating to this debt offering, which is poor.

KLM Axiva Finvest Ltd. (KLMAFL) is a non-deposit taking systemically important non-banking finance company ("NBFC") primarily serving low and middle-income individuals and businesses that have limited or no access to formal banking and finance channels.

As of August 31, 2021, it operates through 285 branches across four states namely Kerala, Karnataka, Tamil Nadu and Telangana managed through a corporate office located at Kochi. As of March 31, 2021, March 31, 2020, and March 31, 2019, KLMAFL's AUM was Rs.  747.30 cr., Rs.  513.54 cr. and Rs.  373.83 cr. respectively. Its AUM increased at a CAGR of 41.39% for the said periods. 

The company also has a wholly-owned subsidiary, namely KMLM Financial Services Limited. 

KLMAFL offers gold loans, MSME loans, Personal Loans, Microfinance loans, vehicle loans etc. 

The company is coming out with its fifth debt offer since September 2018. The company will be issuing secured redeemable non-convertible debentures of Rs. 1000 each. The base size of the issue is Rs. 100 cr. and it has an option to retain oversubscription to the tune of Rs. 100 cr. thus making a total issue size of Rs. 200 cr. The issue opens for subscription on September 30, 2021, and will close on or before October 26, 2021. Minimum application is to be made for 5 NCDs (i.e. Rs. 5000.00) and in multiples of 1 NCD (i.e. Rs. 1000.00) thereon, thereafter. Post allotment, these NCDs will be listed on BSE only. The company will be spending Rs. 1.26 cr. for this entire issue process. 

From the net proceeds, the company will use at least 80% for onward lending, financing and repayment/prepayment of principal and interest on existing borrowings and up to 20% for general corporate purposes. 

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd., while Vistra ITCL (India) Ltd. is the debenture trustee. KFin Technologies Pvt. Ltd. is the registrar of the issue. 

The company is offering coupon rates ranging from 10.00% to 11.25%. It has tenure ranging from 366 days, 400 days, 18 months, 2 yrs., 3 yrs., 5 yrs. and 80 months. It offers Monthly, Annually and Cumulative interest payment mods based on series and tenure. 

This debt offering is rated CARE BB+ Stable by CARE Ratings Ltd. The rating of NCDs by CARE Ratings indicates that instruments with this rating are considered to have a moderate risk of default regarding timely servicing of financial obligations. Issues with such ratings are always neglected by investors in general. 

On the financial performance front, for the last two fiscals, KLMAFL has (on a consolidated basis) posted a total income/net profit of Rs. 102.25 cr. / Rs. 0.53 cr. (FY20) and Rs. 126.52 cr. / Rs. 7.14 cr. (FY21).  

Its current debt-equity ratio of 8.60 will rise to 10.98 post this debt issue. For the year ended March 31, 2021, its net NPA stood at 4.77% which was 4.47% for FY19 end. As of the said date, it's paid-up equity capital of Rs. 67.93 cr. was supported by free reserves of Rs. 28.67 cr. 

Conclusion / Investment Strategy

KLM Axiva has emerged as a frequent visitor to the debt market offerings. This time it has lowered the coupon rates. Its post-issue debt-equity ratio raises concern. Its financial data is listless. Risk seeker/cash surplus investors may park moderate funds in this offer.

Review By Dilip Davda on September 29, 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 before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their 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.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

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