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Kosamattam Finance NCD offer review - Dec 2016 (May apply)

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Kosamattam Finance Ltd (KFL) a frequent visitor to the capital market for debt funds is once again entering the debt market with its IXth NCD offer. The company 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. Further, the company also has a Full Fledged Money Changers ('FFMC').

KLF's Gold Loan portfolio as of the six month period ending September 30, 2016 and for the financial years ending on March 2016, March 31, 2015, and March 31, 2014, comprised of 4,94,372, 4,79,540, 4,47,389 and 3,76,341 gold loan accounts, aggregating to Rs. 1465 cr. Rs. 1312.24 cr., Rs. 1136.92 cr and Rs. 992.07 cr. which is 89.99%, 89.12%, 94.89% and 96.10% of its total loans portfolio as on those dates. As on October 31, 2016, it had a network of 958 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 employ 3309 persons.

For the purpose of onward lending and for repayment of interest and principal of existing loans it is coming out with a Secured, Redeemable NCDs (of Rs. 1000 each) issue of Rs. 300 crore. The base amount is Rs. 150 crore and the green shoe option is Rs. 150 crore. The company offers coupon rates ranging from 9.00 per cent to 10.25 per cent depending upon tenure of 400 days, 18 months, 36 months, 50 months, 60 months and 84 months NCDs. NCDs are available in demat and physical mode, however, trading will take place only in demat mode. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiples of 1 NCD thereon, thereafter. Interest will be paid on cumulative/monthly basis as per the choice of investors. Issue opens for subscription on 22.12.16 and will close on or before January 20, 2017. Post allotment, NCDs will be listed on BSE. Post issue KFL's debt-equity ratio will stand enhanced from 10.08 per cent to 11.71 per cent.

These NCD issue is graded IND BBB- by India Rating (indicating that instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk). Sole Lead manager to the issue is Vivro Financial Services Pvt Ltd and Vistra ITCL (India) Ltd is the Debenture Trustee. Karvy Computershare Pvt Ltd is the registrar to the issue.

Conclusion / Investment Strategy

Conclusion: Offers with "BBB-" ratings are indicating moderate risk of servicing as well as credit risk. Hence risk savvy investors may consider moderate investment for long term.

Review By Dilip Davda on December 9, 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.


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

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