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Manappuram Home Finance NCD issue review (Apply)

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  • This is a maiden NCD issue from Home Finance arm of Manappuram group

  • This issue is rated CARE AA- (Stable by CARE Ratings.

  • Offers lucrative coupon rates ranging from 9.75% to 10.65%

  • Considering falling interest rate scenario, this offer with lucrative coupon rates worth considering for long term.

About Company:

Manappuram Home Finance Ltd.(MHFL) is a non-deposit taking Housing Finance Company ('HFC'), registered with the National Housing Bank ('NHB'). It is a wholly owned subsidiary of Manappuram Finance Limited ('MAFIL'), and accordingly are part of Manappuram Group. MHFL is focusing on providing affordable housing finance for the EWS, LIG and MIG segment primarily in Tier II and Tier III cities and towns in India. It offers two products namely Home Loan and Loan Against Property ('LAP').

The company provides secured finance primarily to individual customers with focus on self-employed (professionals & nonprofessionals) and salaried (informal segment) for purchase, self-construction, improvement and extension of homes, new and resalable flats, balance transfer of existing loans, commercial properties (purchase/ LAP) and composite loan (land and construction). Its customer base consists of 6,184 customers (number of customers are considered based on number of loan accounts) and total assets under management ('AUM') was Rs. 518.76 cr. based on IND AS, as on March 31, 2019.

As on August 20, 2019, MHFL has 46 branches located across eight states namely Maharashtra, Gujarat, Tamil Nadu, Kerala, Karnataka, Rajasthan, Madhya Pradesh and Andhra Pradesh. Ticket size of MHFL's various loans ranges between Rs. 0.50 lakh to Rs. 35 lakh.

Issue Details:

To part finance its plans for onward lending, financing and repayment of interest and principal of existing borrowings (75% of the net proceeds) and General corpus fund needs (25% of the proceeds) MHFL is coming out with its maiden debt offer of Secured, Redeemable, Non-Convertible Debentures (Secured NCDs) of Rs. 100 cr. with a green shoe option to retain oversubscription to the tune of Rs. 100 cr. making the overall size of the issue worth Rs. 200 cr. MHFL will spend Rs.4.79 cr. for this entire issue proceeds.

The issue opens for subscription on 30.09.19 and will close on or before 29.10.19. 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. Allotment and trading will be done in demat mode only.

The NCD issue is solely lead managed by Vivro Financial Services Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar. Catalyst Trusteeship Ltd. is the Debenture Trustee.

Credit Rating for the Issue:

This issue has been rated CARE AA- (Stable) by CARE Ratings. Such rating indicates that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

Coupon rates for series 1 to 7

Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7
Frequency of Interest Payment Monthly Annually Cumulative Monthly Annually Cumulative Cumulative
Tenor 36 months 36 months 36 months 60 months 60 months 60 months 2500 Days
Face Value/ Issue Price(Rs /NCD) Rs 1000
Mode of Interest Paymeny Through various mode available
Coupon Rate 9.75% 10.00% NA 10.25% 10.65% NA NA
Effective Yield(%)(per annum) 10.20% 10.00% 10.00% 10.75% 10.65% 10.65% 10.65%
Amount on Maturity Rs 1,000 Rs 1,000 Rs 1,331 Rs 1,000 Rs 1,000 Rs 1,659 Rs 2,000

This issue has tenures of 36 months, 60 months and 2500 days and interest payment options are Monthly, Annually or Cumulative as per the choice of investors on the basis of series applied for. It offers coupon rates ranging from 9.75% to 10.65%.

Financial Performance:

On the financial performance front, for the last two fiscals, MHFL has posted total income/net profit of Rs. 51.51 cr. / Rs. - (4.45) cr. (FY18) and Rs. 66.28 cr. / Rs. 3.02 cr. (FY19). Thus it has just turned the corner for FY19.

MHFL's current debt equity ratio of 1.82 will stand enhanced to 2.88. Its gross non-performing assets and net non-performing assets as a percentage of AUM as at March 31, 2019 based on IND AS stood at 3.85% and 3.05% respectively.

Conclusion / Investment Strategy

MHFL has presented just two fiscals financial data. However, considering credit ratings, parent company's strength and fancy among investors, investors looking for steady long term income may consider investment in this offer with lucrative coupon rates as interest rates are set to decline going forward. (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on September 28, 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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