Muthoot Fincorp April 24 -Trence IV NCD issue review - (May apply)

•    This is the 19th debt issue from this company since July 2014.
•    The last debt issue was in January 2024.
•    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.

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.

The Gold loan portfolio of the Company as of December 31, 2023 comprised approximately 31.38 lakhs loan accounts. As of December 31, 2023, it operated out of 3,683 branches located across 24 states, including union territory of Andaman and Nicobar Islands and the national capital territory of Delhi and employed 20,645 employees including 93 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. Its Gold loan products include Muthoot Blue Super Value Loan, Swarna Sureksha Super Value, Easy Blue, Easy Max, Easy Pro, Restart India Pradhan, Easy Scale up 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.

The Company's subsidiaries are engaged in the specific businesses - they are Muthoot Housing Finance Company Limited providing affordable housing loans; subsidiary Muthoot Microfin Limited, providing micro credit facility to aspiring women entrepreneurs; and Subsidiary Muthoot Pappachan Technologies Limited providing IT services. The Company is also authorised to act as a depository participant of CDSL as category II.

ISSUE DETAILS:
The company is coming out with its 19th Debt offer as NCD Tranche IV- April 24 issue. It will issue NCDs worth Rs. 100 cr. as the base size with a green shoe option of retaining additional subscription to the tune of Rs. 260 cr., thus making the overall issue size worth Rs. 360 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 April 10, 2024, and will close on or before April 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. 3.26 cr. for the proceeds of the entire amount of Rs. 360 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 offers the coupon rates between 8.90% to 10.00% and has the tenors for 26 months, 38 months, 60 months, 72 months and 94 months. Interest payment will be either Monthly, Annual, or Cumulative as per the selection of the series applied. 

The company has allocated 5% for Institutional investors, 35% for Non-institutional investors and 60% for Retail investors. 

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 3Qs of FY24 ended on December 31, 2023, it (on a standalone basis) earned a net profit of Rs. 323.02 cr. on a total income of Rs. 2818.46. Surprisingly, it has not given consolidated financial performance data for 3Qs of FY24.

As of December 31, 2023, it had some contingent liabilities worth Rs. 118.25 cr. which is not provided in its financial data. As of the said date, it had approx. 31.38 lakh gold loan account aggregating to Rs. 18738.76 cr., comprising 91.47% of its total loan portfolio.

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 6.24 post this issue.