Kosamattam Finance 13th NCD Offer review - March 2018 (May apply)

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Kosamattam Finance Ltd. (KFL), a regular visitor to the debt market floats is once again coming out with its XIIIth NCD offer. The company is issuing secured/unsecured, redeemable non-convertible debentures worth Rs. 150 crore with a green shoe option to retail over subscription to the tune of Rs. 150 crore, thus making the overall issue size of Rs. 300 crore. It is offering NCDs having face value of Rs. 1000 with tenures of 400 days, 18 months, 36 months, 52 months, 60 months and 88 months. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (Rs. 1000) thereon, thereafter. Issue opens for subscription on 15.03.2018 and will close on or before 13.04.18. It carries coupon rates ranging from 9 to 10% depending on the tenures and the mode of interest payments which is either Monthly or cumulative as per the choice of investors. Post allotment, NCDs will be listed on BSE.

Issue is solely lead managed by Vivro Financial Services Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Vistra ITCL India Ltd. is the debenture trustee. India Ratings & Research Pvt. Ltd. has assigned 'IND BBB-' rating to this offer which indicates moderate degree of safety regarding timely servicing of financial obligations. Such instrument carries moderate credit risk as well.

KFL is a RBI registered systemically important non-deposit taking NBFC primarily engaged in the Gold Loan business, lending money against the pledge of household Jewellery ('Gold Loans') in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry.

 Its Gold Loan portfolio as of the six-month period ending September 30, 2017 and for the financial years ending on March 31, 2017, March 2016 and March 31, 2015 comprised of 5,88,822, 5,57,478, 4,79,540 and 4,47,389 gold loan accounts, aggregating to Rs. 1796.85 crore, Rs. 1730.40 crore, Rs, 1312.24 crore and Rs, 1136.92 crore respectively, which is 90.46%, 90.03%, 89.12% and 94.89% of company's total loans portfolio as on those dates.

As on September 30, 2017, it had a network of 892 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat and Telangana along with the Union Territory of Puducherry and employed 2,831 persons in business operations. KFL belongs to the Kosamattam Group led by Mr. Mathew K. Cherian. In addition to the core business of Gold Loan, it also offer fee-based ancillary services which includes microfinance, money transfer services, foreign currency exchange, power generation, agriculture and air ticketing services.

On the performance front, its revenue grew from Rs. 235.80 crore in FY13 to Rs. 352.25 crore in FY17. However, its bottom line for these years marked see-saw mode. Its PAT that was Rs. 39.28 crore for FY 13 declined to Rs. 15.68 crore for FY17. For the first half of current fiscal, it has posted net profits of Rs. 8.85 crore on revenue of Rs. 190.32 crore. Post issue its current debt-equity ratio of 9.55% will stand increased to 10.63%. As on 30.09.17 its gross and net NPAs were up at 0.66% and 0.31% respectively. On the basis of Tier I capital, it had CAR of 12.09%.

Conclusion / Investment Strategy

Considering poor rating, only risk savvy cash surplus investors may consider moderate investment for medium to long term. (Other)

Review By Dilip Davda on Nov 22, 2019

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.

Email: dilip_davda@rediffmail.com

More Kosamattam Finance Ltd NCD Views / Analysis / Recommendations ...

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