• This is the 28th debt offer since April 2014 from KFL, a frequent visitor of the debt market.
• Its last offer was in the month of April 2023.
• Instrument rated as IND A-/stable outlook by India Ratings.
• Well-informed/cash surplus investors looking for steady returns may consider moderate investment.
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 27th Debt offer from the company since April 2014. It is an IRDA-registered composite corporate insurance agent. Kosamattam also holds SEBI registration as a depository participant and FFMC to act as a money changer. KFL is also an AMFI-registered mutual fund advisor and also holds registration from LEIL. The last offer was in the month of April 2023.
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. As of June 30, 2023, it had a network of 989 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 4092 persons in business operations.
DEBT OFFER DETAILS:
KFL is coming out with a debt offering of Secured and Unsecured 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 September 08, 2023, and will close on or before September 22, 2023. 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 debt issue process. 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.
This NCD issue has tenures of 20 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., Such 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 make 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). Thus it has shown gradual 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 March 31, 2023, its current paid-up equity capital of Rs. 216.88 cr. is supported by free reserves of Rs. 547.14 cr. Its debt-equity ratio of 6.04 as of March 31, 2023, will rise to 6.31 post this debt issue.
Review By Dilip Davda on September 7, 2023
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
