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Kosamattam Finance July/Aug 2019 NCD issue review (May apply)

Kosamattam Finance Ltd Logo
  • KFL, a frequent visitor to debt market brings 16th debt offer since April 2014.
  • Coupon rates are lucrative, but rating is very poor.
  • Instrument rated as IND/BBB which is considered a bit risky bet.
  • It is offering only Monthly or Cumulative interest payment schemes.
  • This time KFL has changed merchant bankers.

About Company:

Kosamattam Finance Ltd. (KFL) is a 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. This is the 16th Debt offer from the company since April 2014. It is IRDA registered composite corporate insurance agent. Kosamattam also holds SEBI registration as depository participant and FFMC to act as money changer. KFL is also an AMFI registered mutual fund advisor and also holds registration from LEIL.

As on May 31, 2019, the company had a network of 928 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 3,251 persons in business operations. KFL belongs to the Kosamattam Group led by Mathew K. Cherian and it having its headquarter in Kottayam in the state of Kerala.

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

Debt Offer Details:

For the purpose of onward lending (55%) and repayment of interest and principal of existing loans (20%) as well as general corpus fund need (25%), KFL is coming out with debt offer of Secured and Unsecured Redeemable Non-Convertible Debentures of Rs 1000 each for Rs 150 crore with a green shoe option to retain oversubscription to the tune of Rs 150 crore making the total issue size of Rs 300. Issue opens for subscription on 16.07.19 and will close on or before 14.08.19. 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.

This issue is rated as IND BBB by India Ratings and Research Pvt. Ld. This rating indicates that instruments with such ratings are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. This time the issue is jointly lead managed by Karvy Investor Services Ltd. and SMC Capitals Ltd. while Karvy Computershare Pvt. Ltd. is the registrar to the issue. Vistra ITCL (India) Ltd. is the debenture trustee.

These NCDs have tenures of 400 days, 24 months, 36 months, 48 months, 60 months and 84 months. It offers coupon rates of 9.25% (on maturity yield basis) for 400 days and for other series ranging from 9.75% to 10.25% based on selection of investors. Frequency of interest payments will be Monthly or cumulative as per the choice of investors. Allotment of these NCDs will be in dematerialized mode only. Application is to be made through ASBA mode only.

 

The specific terms of the Secured NCDs are mentioned below

Tenor

400 days

24 months

36 months

48 months

60 months

84 months

Nature

Secured

Unsecured

Options

I

II

III

IV

V

VI

VII

VIII

Frequency of Interest Payment

Cumulative

Monthly

Monthly

Cumulative

Cumulative

Monthly

Monthly

Cumulative

Minimum Application

Rs 10,000 (10 NCDs) across all Series

In multiples of thereafter

1 NCD after the minimum application

Face Value of NCDs (Rs/NCD)

Rs 1,000

Issue Price of NCDs (Rs/NCD)

Rs 1,000

Mode of Interest Payment/Redemption

Through various options available

Coupon (%) per annum in Category I, II and III

NA

9.75%

10%

NA

NA

10%

10.25%

NA

Coupon Type

Fixed

Redemption amount (Rs per NCD)for NCD Holders in Category I, II and III Effective Yield (%) (per annum) - Category I, II and III

1,101.81

1,000

1,000

1,350

1,500

1,000

1,000

2,000

Put and Call Option

NA

Deemed Date of Allotment

The date on which the Board or a duly authorised committee approves the Allotment of NCDs. All benefits relating to the NCDs including interest on the NCDs shall be available to the investors from the Deemed Date of Allotment. The actual Allotment of NCDs may take place on a date other than the Deemed Date of Allotment.

Financial Data:

On financial front, it has posted revenue/net profits of Rs 468.38 cr. / Rs 30.42 cr. (FY19), Rs 434.23 cr. / Rs 26.71 cr. (FY18), Td. 360.31 cr. / Rs 15.74 cr. (FY17). Thus it has shown consistency in growth of top and bottom lines. KFL's yield on Gold Loan assets were 20.74%, 21.13% and 26.35%, respectively. Revenue from Gold Loan business was on an average 92% of the total revenue for all these years.

KFL's net NPAs for fiscal 2019, 2018 and 2017 were 1.28%, 0.59% and 0.27% respectively as are the major concerns. As on 31.03.19 its gold loan customers were 425716. Its current debt equity ratio of 6.33 will stand enhanced to 7.16 post this issue.


Conclusion / Investment Strategy

Coupon rates offered are lucrative. But it has poor rating and the fancy of the group is limited to southern region only. Considering these, cash surplus risk savvy investors may consider investment in this debt offer on their own risk. (Others).

Review By Dilip Davda on Jul 15, 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

The Kosamattam Finance NCD july 2019 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Kosamattam Finance NCD july 2019 worth investing. The Kosamattam Finance NCD july 2019 Note sets the NCD expectations in systematic way which tells you if Kosamattam Finance NCD july 2019 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Kosamattam Finance NCD july 2019 by providing NCD recommendations i.e. subscribe, avoid and neutral.