KLM Axiva Aug 23 NCD issue review - (Avoid)

•    This is the 9th debt offer from the company since September 2018.
•    The last debt offer was in the month of February 2023.
•    The company has maintained the coupon rates for this issue under the same rating.
•    It has posted steady growth in its financial performance.
•    There is no harm in skipping this poor-rated debt offer that carries moderate risk.

PREFACE:
This company uploaded its offer documents only on August 23, 2023, i.e. just on the previous day of the opening of its NCD issue. It has become a frequent debt market visitor. The instrument has a BBB - (minus) rating from India Ratings which is considered poor and not fancied by the average investors. 

ABOUT COMPANY:
KLM Axiva Finvest Ltd. (KLMAFL) (erstwhile known as Needs Finvest Ltd.) 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 June 30, 2023, we operate through 684 branches across six states namely Kerala, Karnataka, Tamil Nadu, Telangana, Andhra Pradesh and Maharashtra managed through its corporate office located at Kochi. It operates primarily in four business verticals: (i) gold loan business, lending money against the pledge of household jewellery, (ii) micro, small and medium enterprises loan, (iii) personal loan, and (iv) microfinance loan to women customers.

As of June 30, 2023, the company had 2480 full-time employees. In addition, it had temporary sales, marketing and recovery personnel who work on a commission basis. It adheres to a policy of nurturing dedicated talent by conducting regular training programmes. It provides training to employees both as a commitment to their career development and also to ensure quality service to customers. These trainings are conducted on joining as part of employee initiation and include additional on-the-job training. 

ISSUE DETAILS:
The company is coming out with its 9th 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. 75 cr. and it has an option to retain oversubscription to the tune of Rs. 75 cr. thus making a total issue size of Rs. 150 cr. The issue has already opened for subscription on August 24, 2023, and will close on or before September 06, 2023. Minimum application is to be made for 5 NCDs (i.e. Rs. 5000.00) and in multiple 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. 1.50 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 a maximum of up to 20% for general corporate purposes. Vivro Financial Services Pvt. Ltd., is the sole lead manager for this issue and 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 9.00% to 10.75%. It has tenure ranging from 400 days, 16 months, 18 months, 2 yrs., 3 yrs., 5 yrs., and 82 months. It offers Monthly, Annually, and Cumulative interest payment mods based on series and tenure. 

CREDIT RATING:
The debt offering is rated IND BBB - (BBB Minus) Stable by India Ratings and Research Pvt. Ltd. The rating of NCDs by India 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. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last four fiscals, KLMAFL has (on a consolidated basis) posted a total income/net profit of Rs. 102.25 cr. / Rs. 0.51 cr. (FY20) and Rs. 126.52 cr. / Rs. 7.06 cr. (FY21), and Rs. 185.91 cr. / Rs. 11.38 cr. (FY22), and Rs. 278.75 cr. / Rs. 18.33 cr. (FY23). 

Its current debt-equity ratio of 5.61 will rise to 6.22 after this debt issue. Its net NPA stood at 0.82% as of March 31, 2023, against 2.70% as of March 31, 2022.