Kosamattam Fin. January 2024 NCD Issue review - (May apply)

•    This is the 29th debt offer since April 2014 from KFL, a frequent visitor of debt market. 
•    Its last offer was in the month of September 2023. 
•    The company has posted growth in its financial performance for the reported periods.
•    Instrument rated as IND A-/stable outlook by India Ratings.
•    Investors looking for steady returns may consider moderate investment.

ABOUT COMPANY:
Kosamattam Finance Ltd. (KFL) is a non-deposit taking NBFC - Middle Layer 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, Uttar Pradesh and Telangana along with the Union Territory of Puducherry. 

Its Gold Loan portfolio for the financial years ending on March 31, 2023, March 31, 2022 and March 31, 2021 comprised of 8,82,414, 8,10,711 and 7,18,836, gold loan accounts, respectively, aggregating to Rs. 4454.08 cr. Rs. 3658.02 cr. and Rs. 3146.10 cr. respectively, which is 98.68%, 98.52% and 98.34% of KFL's total loans portfolio as on those dates. As on September 30, 2023, it had a network of 994 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat, Uttar Pradesh and Telangana along with the Union Territory of Puducherry and employed 3,842 persons in business operations. 

The company belongs to the Kosamattam Group led headquartered in Kottayam in the state of Kerala. Gold Loan is the most significant product in the product portfolio of the Company. Its Gold Loan customers are typically businessmen, vendors, traders, farmers, salaried individuals and families, who for reasons of convenience, accessibility or necessity, avail of KFL's credit facilities by pledging their gold jewellery with under various gold loan schemes. These Gold Loan schemes are designed such that higher per gram rates are offered at higher interests and vice versa, subject to applicable laws. This enables its customers to choose the Gold Loan scheme best suited to their requirements. These Gold Loan schemes are revised by the company, from time to time based on the rates of gold, the market conditions and regulatory requirements. Its Gold Loans are sanctioned for a tenure of up to 12 months, with an option to customers to foreclose the Gold Loan.

In addition to the core business of Gold Loan, KFL also offers fee-based ancillary services which include Microfinance, money transfer services, foreign currency exchange, power generation, agriculture, and air ticketing services. Thus it has diverse business activities. 

DEBT OFFER DETAILS:
KFL is coming out with a debt offering of Secured Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 100 crores with a green shoe option to retain oversubscription to the tune of Rs. 100 crores making the total issue size of Rs. 200 crores. Issue is opening for subscription on January 01, 2024, and will close on or before January 12, 2024. 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. 1.60 cr. for this entire issue proceeds. From the net proceeds, the company will use for the purpose of onward lending (at least 40%) and repayment of interest and principal of existing loans (up to 35%) as well as general corpus fund need (maximum up to 25%).

The issue is solely lead managed by SMC Capitals Ltd. while KFin Technologies Pvt. Ltd. is the registrar of the issue. Vistra ITCL (India) Ltd. is the debenture trustee.

These NCD issue have tenures of 18 months, 24 months, 30 months, 36 months, 39 months, 48 months, 54 months, and 88 months. It offers coupon rates from 8.75% to 10.00% based on the selection of investors. The frequency of interest payments will be Monthly or cumulative as per the choice of investors. 

The company has allocated 10% for Institutional Investors, 10% for Non-Institutional investors, 30% for HNIs and 50% for Retail investors. 

CREDIT RATINGS:
This issue is rated as IND A-/Stable by India Ratings I& Research Pvt. Ld., this rating indicates that instruments with this rating are considered to have an adequate degree of safety regarding the timely servicing of financial obligations. 

Such instruments carry low 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.

FINANCIAL DATA:
For the last four fiscals, the company has posted total income/net profits of Rs. 499.33 cr. / Rs. 47.66 cr. (FY20) and Rs. 541.84 cr. / Rs. 65.25 cr. (FY21), Rs. 624.79 cr. / Rs. 80.00 cr. (FY22), and Rs. 782.54 cr. / Rs. 107.05 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 57.66 cr. on a total income of Rs. 413.70 cr., translating into net profit margin of 13.97%. Thus it has shown growth in its top and bottom lines. 

KFL's net NPAs have declined from 0.86% for FY21 to 0.68% as of FY23, and as of September 30, 2023, its current paid-up equity capital of Rs. 222.14 cr. is supported by free reserves of Rs. 625.84 cr. Its debt-equity ratio of 6.00 as of September 30, 2023, will rise to 6.24 post this debt issue.