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Manappuram Fin Tranche-II NCD Offer review (May apply)

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•    MFL is coming for second debt issue within last four months.
•    The company enjoys prime status in its business verticals.
•    Offer is rated AA/Stable by CARE and BWR
•    Rates lowered than the last offer following bond markets movement.
•    Worth considering for long term fixed income.

Manappuram Finance Ltd. (MFL) is primarily engaged in gold loans and has diversified its activities into retail finance related business. As on 30.06.18, it had a network of 3330 branches in 28 states and union territories of India. It is one of the major NBFC players in the gold finance business in India. (Source: CRISIL Report). It provides loans against the pledge of household and/or used gold jewellery and provides short-term personal and business gold loans ('Gold Loans') primarily to retail customers who require immediate availability of funds, but who do not have access to formal credit on an immediate basis. Company's Gold Loans portfolio as of September 30, 2018 comprised approximately 3.92 million customers aggregating a principal amount of approx Rs. 12593 cr. in Gold Loans, which accounted for 76.31% of its total loans on a consolidated basis.

The other business verticals of the Company include Vehicle and Equipment Finance Business, Payments business, SME business and fee based services including forex and money transfer. Further, it has also expanded into other business verticals such as microfinance business through Subsidiary AML, housing finance business through Subsidiary MHFL and insurance broking through Subsidiary MAIBRO.

MFL that came with debt offer in Oct-Nov. 2018, is once again coming to tap the market with its Tranche =II Secured, Redeemable Non-Convertible Debentures of Rs. 1000 each with a base size of Rs. 150 cr. with a green shoe option to retain oversubscription to the tune of Rs. 587 cr. Thus the over all size for this offer will be Rs. 737 cr.  

Issue opens for subscription on 28.01.19 and will close on or before 27.02.19. 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. Frequency of interest payments will be on the basis of Monthly, Annually or cumulative as per the choice of the applicants.

These NCDs have tenures of 36 months, 60 months and 2617 days. For cumulative mode, special tenure of 2617 days only is applicable. It offers coupon rates ranging from 9.35% to 10.15%. The company has allocated 20%, 30% and 50% of total issue size for QIB/MF, HNI and Retail categories respectively.  Post issue MFL's current Debt/Equity ratio of 2.78 (as on 30.09.18) will stand enhanced to 3.02.

Application is to be made under ASBA mode only and allotment and trading will take place in demat mode only.

The main object of the issue is to use around 75% of the funds collected for onward lending, for repayment/prepayment of interest and principal of existing borrowings and the rest for general corpus fund needs.

Post allotment, NCDs will be listed on BSE. Issue is jointly lead managed by A K Capital Services Ltd. and Edelweiss Financial Services Ltd. Catalyst Trusteeship Ltd. is the debenture trustee while Link Intime India Pvt. Ltd. is the registrar to the issue.

Issue is rated as CARE/AA/Stable by Care Ratings Ltd. and BWR/AA+/Stable by Brickwork Ratings India Pvt. Ltd. The rating of the NCDs by CARE and Brickwork indicates high degree of safety regarding timely servicing of financial obligations.

On financial performance front, MFL has (on a consolidated basis) posted total revenue/net profits of Rs. 2373.83 cr. / Rs. 355.16 cr. (FY16), Rs. 3408.92 cr. / Rs. 758.49 cr. (FY17) and Rs. 3476.56cr. / Rs. 668.41 cr. (FY18). It has suffered a setback in bottom line for FY18. For first half of FY19 it has (on consolidated basis) earned net profit of Rs. 423.99 cr. on total income of Rs. 1974.70 cr. As on 30.09.18 its paid up equity capital of Rs. 168.56 cr. is supported by free reserves of Rs. 3975 cr. plus. As on said date its gross and net NPAs were 0.68% and 0.40% respectively.  Its CAR stood at 25.35% (Tier –I) and 0.42% (Ties-II) basis for the said date.

Conclusion / Investment Strategy

Considering AA/Stable ratings, sound financial data and lucrative coupon rates, investors looking for longterm fixed income may go for Manappuram Finance NCD.

Review By Dilip Davda on January 25, 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.


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