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Muthoot Finance April 2021 NCD Issue review (May apply)

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  • A frequent visitor to debt market brings its 23rd offer since August 2011.
  • Issue is rated AA+ Stable/Positive by ICRA and CRISIL respectively.
  • Company has good financial performance.
  • Considering falling interest rate scenario, coupon rates are reasonable.

ABOUT COMPANY

Muthoot Finance Ltd.(MFL) is the largest gold loan NBFC in India in terms of loan portfolio. MFL 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.

Company's branch network has expanded significantly from 373 branches as of March 31, 2005 to 4,632 branches as of December 31, 2020, comprising 792 branches in northern India, 2,777 branches in southern India, 754 branches in western India and 309 branches in eastern India covering 22 states, the national capital territory of Delhi and six union territories in India. As at December 31, 2020 it employed 25893 personnel in its operations.

ISSUE DETAILS

This company is a frequent visitor for the debt market and this is the 23rd debt offer from it. Last offer was in December 2020.

To part finance its plans for onward lending (75% of the net proceeds) and General corpus fund needs (25% of the proceeds) MFL is coming out with Tranche III 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 1600 cr. making the overall size of the issue worth Rs 1700 cr. MFL has an overall shelf limit of Rs 4000 cr. for the issue. The issue opens for subscription on April 08, 2021 and will close on or before April 29, 2021. 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. MFL will be spending Rs 17 crore for this issue proceeds.

The NCD issue is jointly lead managed by Edelweiss Financial Services Ltd., JM Financial Ltd., Equirus Capital Pvt. Ltd. and A K Capital Services Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue while IDBI Trusteeship Ltd. is the Debenture Trustee.

This issue has been rated ICRA/ AA+ (Stable) by ICRA and CRISIL AA+/Positive by CRISIL. The rating of the NCDs by ICRA and CRISIL indicates high degree of safety regarding timely servicing of financial obligations.

This issue has tenures of 26 months, 38 months, 60 months and 120 months 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 6.60% to 8.00%. The Company is offering additional 0.25% incentive for HNI (Category III) and Retail Investors (Category IV).

FINANCIAL PERFORMANCE

On the financial performance front, for the last three fiscals, on a consolidated basis, MFL has posted total income/net profit of Rs 6781.69 cr. / Rs 1843.75 cr. (FY18) and Rs 7601.05 cr. / Rs 2102.96 cr. (FY19), Rs 9707.27 cr. / Rs 3168.68 cr. (FY20). For 9M of FY21 it has earned net profit of Rs 2795.11 cr. on a total income of Rs 8447.45 cr. Post this issue, MFL's current debt equity ratio of 3.19 will stand enhanced to 3.32.

As on September 30, 2020, it's paid up equity capital of Rs 401.19 cr. is supported by free reserves of Rs 14092.10 cr.


Conclusion / Investment Strategy

This company has good track records of its financial data as well as business practices. This debt offer is rated AA+/Stable by CRISIL and ICRA and coupon rates are in line with market trends for such ratings. Investors looking for steady income may consider investment for long term in this offer.

Review By Dilip Davda on Apr 6, 2021

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.

Email: dilip_davda@rediffmail.com

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