Muthoot Fincorp Jan.24 - Tranche-III NCD Issue review - (May apply)

•    This is the 18th debt issue from this company since July 2014.
•    The last debt issue was in October 2023.
•    The issue is rated as CRISIL/AA- Stable by CRISIL Ltd. 
•    Well-informed investors may park moderate funds for regular income.
 
ABOUT COMPANY:
Muthoot Fincorp Ltd. (MFL) is middle layer NBFC ("NBFC ML") registered with the RBI. The Company is one of the prominent gold loan players in the Indian market. The personal and business loans secured by gold jewellery and ornaments ("Gold loans") offered by the Company 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 MFL as of September 30, 2023 comprised approximately 31.68 lakhs loan accounts. As of September 30, 2023, the Company operated out of 3619 branches located across 24 states, including union territory of Andaman and Nicobar Islands and the national capital territory of Delhi and employed 20507 employees including 91 contracted experts in its operations. It has been engaged in the Gold loans business for over two decades and are headquartered in Kerala, India. The Company provides retail loan products, primarily comprising of Gold loans. 

MFL's 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 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 tenure of up to 24 months.

ISSUE DETAILS:
The company is coming out with its 18th Debt offer as NCD Tranche III - Jan. 24 issue. It will issue NCDs worth Rs. 75 cr. as the base size with a green shoe option of retaining additional subscription to the tune of Rs. 225 cr., thus making the overall issue size worth Rs. 300 cr. The company has a shelf limit of Rs. 1100 cr. The issue of Secured, Redeemable, Non-convertible debentures of Rs. 1000 each is opening for subscription on January 12, 2024, and will close on or before January 25, 2024. 

The 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 Rs. 3.27 cr. for the proceeds of the entire amount of Rs. 300 cr. 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. 

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. 

It has maintained the coupon rates between 8.90% to 9.75% and has the tenors for 24 months, 36 months, 60 months and 96 months. Interest payment will be either Monthly, Annual, or Cumulative as per the selection of the series applied for. 

ISSUE RATING:
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. 4101.19 cr. / Rs. 397.28 cr. (FY21) and Rs. 4355.13 cr. / Rs. 412.55 cr. (FY22), and Rs. 5151.33 cr. / Rs. 646.42 cr. (FY23). Thus it has posted steady growth in its top and bottom lines during reported periods. For H1 of FY24 ended on September 30, 2023, it (on a standalone basis) earned a net profit of Rs. 200.88 cr. on a total income of Rs. 1788.90. Surprisingly, it has not given consolidated financial performance data for H1 of FY24.

Net NPAs as of March 31, 2023, stood at 0.59% against 1.59% as of March 31, 2022. Its current debt equity ratio as of the said date of 6.16 will stand enhanced to 6.23 post this issue.