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Muthoot Fincorp NCD Jan. 23 Issue review (May apply)

Muthoot Fincorp Limited Logo

•    This is the 14th debt offer from this company since July 2014. 
•    This last offer was in August 2022. 
•    Issue is rated as CRISIL/AA -  Stable and is offering reasonable coupon rates.
•    For this offer it has hiked the coupon rates.
•    Investors looking for steady regular returns may park moderate funds.

ABOUT COMPANY:
Muthoot Fincorp Ltd. (MFL) is one of the prominent gold loan players in the Indian market. From FY2016 to FY2022, MFL has shown a significant increase in its Gold Loan Portfolio at a compound annual growth rate of around 15 % (Source: IMaCS Report). The personal and business loans secured by gold jewellery and ornaments ("Gold loans") offered by it are structured to serve the business and personal purposes of individuals who do not have ready or timely access to formal credit or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements.

The Gold loan portfolio of the Company as of September 30, 2022, comprised approximately 33.23 lakhs loan accounts. As of September 30, 2022, it operated out of 3,629 branches located across 25 states, including the union territory of Andaman and Nicobar Islands and the national capital territory of Delhi, and employed 16,264 employees including 148 contracted experts in its operations.

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 the 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 the Company, 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.

OFFER DETAILS:
MFL is coming out with its Secured Redeemable Non-Convertible debentures of Rs. 1000 each for a base amount of Rs. 200 cr. It has a green shoe option to retain an oversubscription of Rs. 200 cr. thus making the overall size of the offer Rs. 400 cr. The issue opens for subscription on January 02, 2023, and will close on or before January 27, 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. 5.12 cr. for the proceeds of the entire amount of Rs. 400 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 14th debt offer from the company since July 2014. The last offer was in August 2022. It has hiked the coupon rates this time in line with the current interest rates scenario.

This offer has tenures of 27 months, 38 months, 48 months, and 60 months. It offers coupon rates ranging from 8.10% to 8.80% 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 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 H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 202.41 cr. on a total income of Rs. 1663.42 cr. 

Its Net NPAs as of September 30, 2022, stood at 2.06% against 1.57% as of March 31, 2022. This raises a concern. 

As on September 30, 2022, on a standalone basis, its paid-up equity capital of Rs. 193.71 cr. is supported by free reserves of Rs. 3622.25 cr. Post issue (on a consolidated basis) its current debt-equity ratio of 4.70 will stand enhanced to 4.80. 


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 H1 of FY23. The company has been gaining ground with diverse activities. Cash surplus Investors looking for a steady regular return may consider parking moderate funds.

Review By Dilip Davda on Jan 1, 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 information published here. Any reader taking decisions based on any information published here does so entirely at its 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.

(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 Fincorp NCD December 2022 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 December 2022 worth investing. The Muthoot Fincorp NCD December 2022 Note sets the NCD expectations in systematic way which tells you if Muthoot Fincorp NCD December 2022 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Muthoot Fincorp NCD December 2022 by providing NCD recommendations i.e. subscribe, avoid and neutral.


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