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Muthoot Finance NCD Tranche IV (Nov. 2019) issue review (Subscribe)

  • A frequent visitor to debt market brings its 20th offer since August 2011.
  • Company has good financial performance.
  • Issue is rated AA Stable by ICRA and CRISIL.
  • Terms and conditions of this debt offer are similar to last offer except the issue size.
  • Considering falling interest rate scenario, coupon rates are lucrative.

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. Its Gold Loan portfolio as of Sept 30, 2019 comprised approximately 8.1 million loan accounts in India that are serviced through 4,540 branches across 23 states, the national capital territory of Delhi and five union territories in India. As of Sept 30, 2019 it employed 25091 persons in its operations. As on said date it 222 ATMs spread across 17 states.

Issue Details:

This company is a frequent visitor for the debt market and has brought 19 offers so far since August 2011. Thus this is the 20th offer from its stable.

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. 690 cr. making the overall size of the issue worth Rs. 790 cr. MFL has a shelf limit of Rs. 4000 cr. for this issue. The issue opens for subscription on 29.11.19 and will close on or before 24.12.19. 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 spend Rs. 8 crore for this issue proceeds.

The NCD issue is jointly lead managed by Edelweiss Financial Services 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/Stable by CRISIL. The rating of the NCDs by ICRA and CRISIL indicates high degree of safety regarding timely servicing of financial obligations.

The specific terms of each instrument are set out below

  Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 Series 8 Series 9 Series 10
Frequency of Interest Payment Monthly Monthly Monthly Annually Annually Annually NA NA NA NA
Tenor 24 Months 38 Months 60 Months 24 Months 38 Months 60 Months 24 Months 38 Months 60 Months 90 Months
Coupon Rate (Retail) 9.25% 9.50% 9.75% 9.50% 9.75% 10.00% NA NA NA NA
Effective Yield (per annum) 9.25% 9.50% 9.75% 9.50% 9.75% 10.00% 9.25% 9.50% 9.75% 9.67%
Amount on Maturity ₹1,000 ₹1,000 ₹1,000 ₹1,000 ₹1,000 ₹1,000 ₹1,193.56 ₹1,333.72 ₹1,592.29 ₹2,000
Mode of Payment Through Various Options Available

This issue has tenures of 24 months 38 months, 60 months and 90 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 9.25% to 10% (same as last debt offer).

Financial Performance:

On the financial performance front, for the last two 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). For H1 of FY20 it has earned net profit of Rs. 1471.86 cr. on a total income of Rs. 4478.50 cr. Post this issue, MFL's current debt equity ratio of 2.97 will stand enhanced to 3.04. As on 31.03.19 it's gross / net NPAs were 2.72%/ 2.39% against 4.42%/3.84% for a year ago period.


Conclusion / Investment Strategy

Considering its financial performance, credit ratings, investors looking for steady long term income may consider investment in this offer with lucrative coupon rates as interest rates are set to decline going forward. (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Nov 28, 2019

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 NCD Nov 2019 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 Nov 2019 worth investing. The Muthoot Finance NCD Nov 2019 Note sets the NCD expectations in systematic way which tells you if Muthoot Finance NCD Nov 2019 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Finance NCD Nov 2019 by providing NCD recommendations i.e. subscribe, avoid and neutral.


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