Muthoot Fincorp April 23 NCD issue review (May apply)

• This is the 15th debt offer from this company since July 2014.
• This last offer was in January 2023.
• Issue is rated as CRISIL/AA - Stable and is offering higher coupon rates.
• Well-informed Investors looking for steady regular returns may park moderate funds.

ABOUT COMPANY:

Muthoot Fincorp Ltd. (MFL) has been engaged in the Gold loans business for over two decades and is headquartered in Kerala, India. The Company provides retail loan products, primarily comprised of Gold loans. Its Gold loan products include Muthoot Blue Guide Gold loan, Muthoot Blue Bright Gold loan, Muthoot Blue Power Gold loan, Muthoot Blue Bigg Gold loan, Muthoot Blue Smart Gold loan and 24x7 Express Gold loan. The product of MFL, the "24x7 Express Gold loan" can be utilised by individuals who require quick loans against their gold jewellery and who have an existing loan with the Company. This is a type of top-up loan. "Smart Plus Gold loan", the other Gold loan variant of the Company is specifically designed for salaried customers, with a tenure of up to 24 months.

The Gold loan portfolio of MFL as of December 31, 2022, comprised approximately 32.89 lakhs of loan accounts. As of the same date, it operated out of 3,627 branches located across 24 states, including the union territory of Andaman and Nicobar Islands and the national capital territory of Delhi and employed 15,079 employees including 168 contracted experts in its operations.

OFFER DETAILS:

MFL is coming out with its Secured Redeemable Non-Convertible debentures of Rs. 1000 each for a base amount of Rs. 150 cr. It has a green shoe option to retain an oversubscription of Rs. 150 cr. thus making the overall size of the offer Rs. 300 cr. The issue opens for subscription on April 12, 2023, and will close on or before April 26, 2023. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiple of 1 NCD (Rs. 1000) thereon, thereafter. Post-allotment NCDs will be listed on BSE.

MFL will spend about Rs. 3.84 cr. for the proceeds of the entire amount of Rs. 300 cr. However, the issue-related expenses are indicative and are subject to change depending on the actual level of subscription to the Issue, the number of allottees, market conditions, and other relevant factors. Out of the available net proceeds, at least 75% will be used for onward lending, financing, repayment/prepayment of existing borrowings with interest, and the balance up to 25% for general corporate purposes.

This is the 15th debt offer from the company since July 2014. The last offer was in January 2023. It has hiked the coupon rates in line with the current interest rates scenario. This offer has tenures of 27 months, 42 months, 60 months, and 84 months. It offers coupon rates ranging from 8.40% to 9.15% depending on the options applied. Interest payment will be either Monthly, Annual, or Cumulative as per the selection of the series applied for.

The issue is solely lead managed by SMC Capitals Ltd. while Integrated Registry Management Services Pvt. Ltd. is the registrar of the issue and Vardhman Trusteeship Pvt. Ltd. is the Debenture Trustee.

ISSUE RATINGS:

This offer is rated as CRISIL/AA- Stable by CRISIL. The rating of the NCDs indicates that instruments with this rating are considered to have an adequate degree of safety regarding the timely servicing of
financial obligations. Such instruments carry very low credit risk.

The ratings provided by CRISIL Ratings Limited may be suspended, withdrawn, or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities, and Investors should take their own decisions.

FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, MFL has (on a consolidated basis) posted total revenue/net profits of Rs. 3765.99 cr. / Rs. 257.93 cr. (FY20), Rs. 4101.19 cr. / Rs. 397.28 cr. (FY21) and Rs. 4355.13 cr. / Rs. 412.55 cr. (FY22). Thus it has posted steady growth in its top and bottom lines during reported periods.

On a standalone basis, for 3Qs of FY23 ended on December 31, 2022, it earned a net profit of Rs. 317.91 cr. on a total income of Rs. 2541.56 cr. Its Net NPAs as of December 31, 2022, stood at 2.23% against 1.57% as of March 31, 2022. This raises a concern. (on a standalone basis).

Post issue its current debt-equity ratio of 4.75 will stand enhanced to 4.83. As of December 31, 2022, its gold loan AUM stood at Rs.17852 cr.

Conclusion / Investment Strategy

Its coupon rates are hiked with an AA- (minus) rating by CRISIL amidst a rising interest rate scenario. Its net NPAs have risen for 3Qs of FY23 which raise concern. The company has been gaining ground with diverse activities. Well-informed/Cash surplus Investors looking for a steady regular return may consider parking moderate funds.

Review By Dilip Davda on April 7, 2023

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 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 Fincorp NCD April 2023 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 Fincorp NCD April 2023 worth investing. The Muthoot Fincorp NCD April 2023 Note sets the NCD expectations in systematic way which tells you if Muthoot Fincorp NCD April 2023 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Fincorp NCD April 2023 by providing NCD recommendations i.e. subscribe, avoid and neutral.

Muthoot Fincorp April 23 NCD issue review (May apply)

Conclusion / Investment Strategy

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