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Muthoot Finance NCD Tranche-II (Dec. 2020) issue review (Apply)

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  • A frequent visitor to debt market brings its 22nd offer since August 2011.
  • Issue is rated AA Stable/Positive by ICRA and CRISIL respectively.
  • Company has good financial performance.
  • This offer has lower rates compared to its last offer of October 2020.
  • Considering falling interest rate scenario, coupon rates are reasonable.


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.

MFL's Gold Loan portfolio as of September 30, 2020 comprised approximately 7.62 million loan accounts in India that were serviced through 4,607 branches across 22 states, the national capital territory of Delhi and six union territories in India. As of September 30, 2020 it employed 25,987 persons in operations.

Company's branch network has expanded significantly from 373 branches as of March 31, 2005 to 4,607 branches as of September 30, 2020, comprising 790 branches in northern India, 2,760 branches in southern India, 751 branches in western India and 306 branches in eastern India covering 22 states, the national capital territory of Delhi and six union territories in India.


This company is a frequent visitor for the debt market and has brought 21 offers so far since August 2011. Last offer (21st) was in October 2020. Thus this 22nd offer comes in a short duration.

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 900 cr. making the overall size of the issue worth Rs 1000 cr. MFL has a overall shelf limit of Rs 4000 cr. for the issue. The issue opens for subscription on December 11, 2020 and will close on or before January 05, 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 10 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.

Muthoot Finance NCD Terms of Each Instrument

Option/Series I II III IV V VI
Tenor 38 months 60 Months 38 months 60 Months 38 months 60 Months
Interest Frequency Monthly Monthly Annual Annual NA NA
Coupon Rate (% p.a.) Cat I, II, III, IV 6.75% 7.10% 7.00% 7.35% NA NA
Effective Yield (% p.a.) Cat I, II 6.75% 7.10% 7.00% 7.35% 7.00% 7.35%
Effective Yield (% p.a.) Cat III, IV 7.15% 7.50% 7.40% 7.75% 7.40% 7.75%
Amount(Rs /NCD) on Maturity - Cat I, II Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,239.34 Rs 1,425.64
Amount(Rs /NCD) on Maturity - Cat III, IV Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,254.11 Rs 1,452.40

This issue has tenures of 38 months and 60 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 6.75% to 7.75% .The Company is offering additional 0.25% incentive for HNI (Category III) and Retail Investors (Category IV). These rates are lower than the last offer of October 2020.


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 H1 of FY20 it has earned net profit of Rs 1788.48 cr. on a total income of Rs 5431.01 cr. Post this issue, MFL's current debt equity ratio of 3.43 will stand enhanced to 3.50.

As on September 30, 2020, it's paid up equity capital of Rs 401.17 cr. is supported by free reserves of Rs 13098.20 cr.

Conclusion / Investment Strategy

Considering its financial performance, credit ratings, investors looking for steady long term income may consider investment in this offer with reasonable coupon rates in the falling interest rates scenario. (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on December 8, 2020

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.


The Muthoot Finance NCD Dec 2020 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 NCD Dec 2020 worth investing. The Muthoot Finance NCD Dec 2020 Note sets the NCD expectations in systematic way which tells you if Muthoot Finance NCD Dec 2020 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Finance NCD Dec 2020 by providing NCD recommendations i.e. subscribe, avoid and neutral.