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.
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.
ISSUE DETAILS:
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.
| 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.
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 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.
Review By Dilip Davda on December 8, 2020
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
