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• This is the 33rd debt issue from MFL since August 2011.
• The last debt offer from the company was in September 2023.
• The issue is rated AA+/Stable by ICRA.
• It offers coupon rates ranging between 8.25% to 8.50%.
• Investors looking for steady income may consider moderate investment for medium to long-term.
ABOUT COMPANY:
Muthoot Finance Ltd. (MFL) is the largest gold loan NBFC in India in terms of loan portfolio. According to the CRISIL Limited, CRISIL Research - Industry Report on Gold Loans in March 2023, the company is ranked the largest gold loan NBFC. 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. According to the CRISIL Research - Industry Report on Gold Loans in March 2023 its branch network was the largest among gold loan NBFCs in India. MFL's Gold Loan portfolio as of September 30, 2023 comprised approximately 8.52 million loan accounts in India that it serviced through 4745 branches across 22 states, the national capital territory of Delhi and six union territories in India. As of September 30, 2023 the company employed 28097 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. MFL is an "Upper Layer NBFC" (NBFC-UL) headquartered in the south Indian state of Kerala. Its operating history has evolved over a period of 84 years.
Historically, it raised capital by issuing secured non-convertible debentures called "Muthoot Gold Bonds" on a private placement basis to retail investors. Since 2013, we are issuing non-convertible debentures to retail investors through public issuance. Since July, 2013, it has raised Rs. 19606.85 cr. in non-convertible debentures issued under the public issue route. As of September 30, 2023, 0.10 million high net-worth and retail individuals had invested in its secured and unsecured debentures (subordinated debt).
The company also rely on loans from banks and financial institutions as its sources of funds. As of March 31, 2023, we had Rs. 29624.30 cr. as borrowings from banks and financial institutions. It also raises capital by issuing commercial paper and listed and credit rated non-convertible debentures under private placement mode or through public issues to various institutional corporate, high net worth and retail investors.
ISSUE DETAILS:
The company is coming out with its Tranche-III secured redeemable NCD of Rs. 1000 each to mobilize Rs. 100 cr. and it has a green shoe option to retain oversubscription to the tune of Rs. 900 cr., thus making an overall issue size of Rs. 1000 cr. It has a shelf limit of Rs. 2600 cr. The issue opens for subscription on January 08, 2024, and will close on or before January 19, 2024. 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. Post allotment, NCDs will be listed on BSE and NSE. This is the 33rd debt issue from the company since August 2011.
MFL is spending Rs. 12.40 cr. for this debt issue. From the net proceeds, it will utilize at least 75% for the onward lending, financing or repayment with interest of certain borrowings and up to 25% for general corporate purposes.
This issue is solely lead managed by A K Capital Services Ltd., while IDBI Trusteeship Services Ltd. is the Debenture Trustee. Link Intime India Pvt. Ltd. is the registrar of the issue.
This debt offer has coupon rates ranging from 8.25% to 8.50% and tenors of 24 months, 36 months, and 60 months. The frequency of interest payment will be Monthly, Annually or Cumulative as per the selection of the series applied.
The company has allocated 5% for Institutions, 30% for Non-Institutions, 30% for HNIs and 35% for Retail investors.
ISSUE RATING:
This debt offer is rated ICRA AA+/Stable by ICRA Ltd. These ratings are not a recommendation to buy, sell or hold securities and investors should take their own decision. These ratings are subject to suspension, revision or withdrawal at any time by the assigning rating agencies and should be evaluated independently of any other ratings.
The aforesaid rating of the NCDs by ICRA indicates high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, MFL has (on a consolidated basis) posted a total income/net profits of Rs. 12238.16 cr. / Rs. 4031.32 cr. (FY22), Rs. 11975.01 cr. / Rs. 3669.77 cr. (FY23). For H1 of FY24 ended on September 30, 2023 (as per unaudited results) it posted a net profit of Rs. 2140 cr. on a total income of Rs. 7140.65 cr.
As of September 30, 2023 its debt equity ratio of 2.73 will rise 2.77 post this issue. As of the said date, its Rs. 401.46 cr. equity capital was supported by free reserves of Rs. 22481.05 cr.
On standalone basis, its Net NPA stood at 12.20% as of June 30, 2023 against 10.20% as of March 31, 2023. This remains a major concern.
Review By Dilip Davda on January 5, 2024
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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their 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.
About Dilip Davda
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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The Muthoot Finance NCD Tranche III January 2024 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 Tranche III January 2024 worth investing. The Muthoot Finance NCD Tranche III January 2024 Note sets the NCD expectations in systematic way which tells you if Muthoot Finance NCD Tranche III January 2024 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Finance NCD Tranche III January 2024 by providing NCD recommendations i.e. subscribe, avoid and neutral.
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