Kosamattam Finance Nov. 2019 NCD issue review (May apply)

Kosamattam Finance Limited Logo
  • KFL, a frequent visitor to debt market brings 17th debt offer since April 2014
  • Offers lucrative coupon rates as its rating is poor
  • Instrument rated as IND/BBB by India Ratings, which is considered a bit risky
  • It is offering only Monthly or Cumulative interest payment schemes
  • Since last debt offer 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 17th 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 Sept. 30, 2019, the company had a network of 939 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 3267 persons in business operations. KFL belongs to the Kosamattam Group led by Mathew K. Cherian and it having it's 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 175 crore with a green shoe option to retain oversubscription to the tune of Rs 175 crore making the total issue size of Rs 350. Issue opens for subscription on 11.11.19 and will close on or before 10.12.19. 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. It will spend Rs 1.60 cr. for this entire issue proceeds.

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. Since last issue KFL is having mandate with Karvy Investor Services Ltd. and SMC Capitals Ltd. for the issue process. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Vistra ITCL (India) Ltd. is the debenture trustee.

These NCDs have tenures of 18 months, 24 months, 36 months, 48 months, 66 months and 84 months. It offers coupon rates of 9.26% to 10.71% 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

  Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 Series 8
Frequency of Interest Payment Cumulative Monthly Monthly Cumulative Cumulative Cumulative Monthly Cumulative
Tenor 18 Months 24 Months 36 Months 36 Months 48 Months 66 Months 84 Months 84 Months
Nature Secured
Coupon(%)per annum For Category I, II & III NA 9.75% 10.00% NA NA NA 10.25% NA
Coupon Rate (Retail) Effective Yield(%)(per annum) For Category I, II & III 9.26% 10.20% 10.47% 10.52% 10.67% 10.71% 10.75% 10.41%
Amount on Maturity For Category I & II/ for III & IV Rs 1,142 Rs 1,000 Rs 1,000 Rs 1,350 Rs 1,500 Rs 1,750 Rs 1,000 Rs 2,000
Put and Call Option Not Applicable
Deemed Date of Allotment The date on which the Board or the Debenture 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:

For the six-month period ending on September 30, 2019 and for the financial years ended March 31, 2019, March 31, 2018, March 31, 2017, March 31, 2016 and March 31, 2015 its total income was Rs 219.33 cr., Rs 468.38 cr., Rs 434.22 cr., Rs 360.31 cr., Rs 345.70 cr. and Rs 257.54 cr. respectively. KFL's profit after tax for the said periods was Rs 16.53 cr., Rs 30.42 cr., Rs 26.71 cr., Rs 15.74 cr., Rs 11.29 cr. and Rs 5.28 cr. respectively. Its gold loan business however reduced from 96.43% in FY 2015 to 91.60% in first half of FY20.

KFL's net NPAs for the first half of FY20, FY19, FY18 and FY17 were 0.98%, 1.29%, 0.59% and 0.27% respectively which are the major concerns. As on 30.09.19 its gold loan customers were 426953. Its current debt equity ratio of 7.16 will stand enhanced 8.07 post this issue. 

Conclusion / Investment Strategy

Coupon rates offered are lucrative. But it has poor rating (BBB) 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 Nov 11, 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 Nov 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 Nov 2019 worth investing. The Kosamattam Finance NCD Nov 2019 Note sets the NCD expectations in systematic way which tells you if Kosamattam Finance NCD Nov 2019 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Kosamattam Finance NCD Nov 2019 by providing NCD recommendations i.e. subscribe, avoid and neutral.