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Muthoot Finance April 23 Tranche I NCD issue review (May apply)

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•    This is the 31st debt offer from MFL since August 2011. 
•    The last debt issue was in February 2023.
•    It has marked continued growth in the reported financial periods. 
•    It has maintained the coupon rates with a continued rating of ICRA AA+/Stable.
•    Investors looking for steady income may consider parking funds.

Muthoot Finance Ltd. (MFL) is a frequent visitor to the debt market with its offer. This is its 31st debt offer since August 2011. The last debt offer from MFL was in February 23.

MFL is the largest gold loan NBFC in India in terms of the loan portfolio. According to the CRISIL Limited, CRISIL Research - Industry Report on Gold Loans in March 2023, it was ranked the largest gold loan NBFC. The company provides personal loans and business loans secured by gold jewellery, or Gold Loans, primarily to individuals who possess gold jewellery but are not able to access formal credit within a reasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. According to the CRISIL Research - Industry Report on Gold Loans in March 2023 MFL's branch network was the largest among gold loan NBFCs in India. Its Gold Loan portfolio as of December 31, 2022, comprised approximately 8.11 million loan accounts in India that it serviced through 4,672 branches across 22 states, the national capital territory of Delhi and six union territories in India. As of December 31, 2022, the company employed 26,399 persons in operations. MFL's branches act as the primary point of sale by assisting with its loan origination, the disbursal and collection processes as well as facilitating customer interaction.

In addition to our Gold Loans business, the company provides money transfer services through branches as sub-agents of various registered money transfer agencies and also provides collection agency services. It has started providing unsecured loans to individuals and loans to traders and self-employed. The company also provides micro-finance, housing finance, vehicle and equipment finance and insurance broking services through its subsidiaries. 

MFL is coming out with a 31st debt offering of secured, redeemable NCDs of Rs. 1000 each to mobilize Rs. 75 cr. and has a green shoe option to retain oversubscription to the tune of Rs. 225 cr. making this offer for an overall size of Rs. 300 cr. It has a shelf limit of Rs. 2600 cr. The minimum application to be made is for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. The issue opens for subscription on April 12, 2023, and will close on or before April 26, 2023. Post allotment, NCDs will be listed on BSE only. MFL is spending Rs. 3.00 cr. for this debt offer of Tranche I. It will use a minimum of 75% of the residual amount for the purpose of onward lending and financing, and up to 25% for general corporate purposes. The company has allocated issues for QIBs 5%, Non-Institutional 5%, HNIs 40%, and Retail investors 50%. 

The issue is solely lead managed by A K Capital Services Ltd. and Link Intime India Pvt. Ltd. is the registrar while IDBI Trusteeship Services Ltd. is the Debenture Trustee for this issue. 

This issue is rated ICRA AA+/Stable by ICRA Ltd. The aforesaid rating of the NCDs by ICRA indicates a high degree of safety regarding the timely servicing of financial obligations. Such instruments carry very low credit risk. The rating provided by ICRA may be suspended, withdrawn, or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities and investors should take their own decisions. 

This debt offer has tenors of 25 months, 37 months, and 61 months. Its coupon rates are ranging from 7.75% to 8.10% with interest payment options of Monthly, Annually, or Cumulative as per the selection series by the investors. It is offering a 0.50% additional incentive to HNIs and Retail investors (i.e. category III and IV). 

On the financial performance front, on a consolidated basis, for the last three fiscals, MFL has posted a total income of Rs. 9707.27 cr. / Rs. 3168.68 cr. (FY20) and Rs. 11566.42 cr. / Rs. 3818.87 cr. (FY21), and Rs. 12237.46 cr. / Rs. 4031.32 cr. (FY22). 

For the 3Qs of FY23 that ended on December 31, 2022, as per unaudited results, it earned a net profit of Rs. 2660.51 cr. on a total income of Rs. 8676.65 cr. MFL's debt-equity ratio of 2.40 (on a consolidated basis) will stand enhanced to 2.52 post this debt offering.

As of December 31, 2022, its paid-up equity capital of Rs. 401.44 cr. is supported by free reserves of Rs. 20266.49 cr.  

On a standalone basis, its net NPA stood at 6.6% as of December 31, 2022, against 8.5% as of March 31, 2022.

Conclusion / Investment Strategy

This is a frequent visitor company for debt market offers. It is now coming with its 31sh debt issue. It has maintained the coupon rates with the same rating. Investors looking for a regular income may consider investing in this AA-rated debt offer.

Review By Dilip Davda on April 7, 2023

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 before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

The Muthoot Finance Limited Tranche I NCD April 2023 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Muthoot Finance Limited Tranche I NCD April 2023 worth investing. The Muthoot Finance Limited Tranche I NCD April 2023 Note sets the NCD expectations in systematic way which tells you if Muthoot Finance Limited Tranche I NCD April 2023 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Finance Limited Tranche I NCD April 2023 by providing NCD recommendations i.e. subscribe, avoid and neutral.