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Muthoot Fin Oct 22 - Tranche III NCD issue review (May apply)

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•    This is the 28th debt offer from MFL since August 2011. The last debt issue was in May 22.
•    It has posted growth in the reported financial periods. 
•    It has scaled up coupon rates at the lower end with the continued same rating.
•    Investors looking for steady income may consider parking funds.

ABOUT COMPANY:
Muthoot Finance Ltd. (MFL) is a frequent visitor to the debt market with its offer. This is its 28th debt offer since August 2011. The last debt offer from MFL was in May 2022.

MFL is the largest gold loan NBFC in India in terms of the loan portfolio. Its Gold Loan portfolio as of June 30, 2022, comprises approximately 8.09 million loan accounts in India that it serviced through 4,617 branches across 22 states, the national capital territory of Delhi, and six union territories in India. As of June 30, 2022, MFL employed 26,618 persons in operations. Its branches act as the primary point of sale by assisting with loan origination, disbursal, and collection processes as well as facilitating customer interaction.

It provides personal loans and business loans secured by gold jewelry, or Gold Loans, primarily to individuals who possess gold jewelry 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. 

ISSUE DETAILS:
MFL is coming out with a 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. 3000 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 October 06, 2022, and will close on or before October 28, 2022. Post allotment, NCDs will be listed on BSE only. MFL is spending Rs. 3.00 cr. for this debt offer of Tranche III. It will use at least 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 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 24 months, 36 months, and 60 months. Its coupon rates are ranging from 7.00% to 7.50% 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. 

FINANCIAL PERFORMANCE:
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 Q1 of FY23 ended on June 30, 2022, as per unaudited results, it earned a net profit of Rs. 824.96 cr. on a total income of Rs. 2804.32 cr., which shows a decline compare to Q1 of FY22 marked net profit of Rs. 978.59 cr. on a total income of Rs. 2963.42 cr.   

On a standalone basis, its net NPA grew from 2.6% for FY21 to 8.5% for FY22 which is a major concern. MFL's debt equity ratio of 2.66 (on a consolidated basis) as of June 30, 2022, will stand enhanced to 2.68 post this debt offering. 


Conclusion / Investment Strategy

This is the frequent visitor company for debt market offers. It is now coming with its 28th debt issue. It has scaled up the coupon rates at the lower end with a maintained rating. Investors looking for a regular income may consider investing in this AA rated debt offer.

Review By Dilip Davda on Oct 5, 2022

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 information published here. Any reader taking decisions based on any information published here does so entirely at its 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.

(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.

Email: dilip_davda@rediffmail.com

The Muthoot Finance Limited Tranche III NCD Oct 2022 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 III NCD Oct 2022 worth investing. The Muthoot Finance Limited Tranche III NCD Oct 2022 Note sets the NCD expectations in systematic way which tells you if Muthoot Finance Limited Tranche III NCD Oct 2022 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Finance Limited Tranche III NCD Oct 2022 by providing NCD recommendations i.e. subscribe, avoid and neutral.


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