Muthoottu Mini Fin NCD Offer review (Avoid)

Muthoottu Mini Financiers Limited Logo

•    MMFL is a Muthoottu Mini group and is engaged in gold loan and other financial services.
•    This is the 6th offer from this company since FY14.
•    Issue rated as IND BBB-/Stable. Such rating indicates moderate risk in servicing.
•    Financial performance is non-encouraging.

Muthoottu Mini Financiers Ltd. (MMFL) a Muthoottu Mini group company is a non-deposit taking systemically important NBFC in the gold loan sector lending money against the pledge of household gold jewellery ('Gold Loans') in the state of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Haryana, Maharashtra, Delhi and Goa and the union territory of Puducherry. It has also recently forayed into microfinance loan segment in the financial year 2017 wherein the company provides unsecured loans to joint liability group of women customers (minimum of 5 persons) who require funds to carry out their business activities through few of its branches in the state of Kerala. Since FY14 this is the 6th debt offer from this company.

MMFL's  Gold Loan portfolio as on September 30, 2018, March 31, 2018, March 31, 2017 and March 31, 2016, comprises of 4,21,769, 4,11,558, 5,16,004 and 5,48,854 Gold Loan accounts respectively, aggregating to  Rs. 1512 cr.,`Rs. 1554 cr., Rs. 1940 cr. and Rs. 1906 cr. which is 96.35%, 95.31%, 99.01% and 99.60% of total loans and advances as on such specific dates. The company, as on September 30, 2018, has a network of 767 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Haryana, Maharashtra, Delhi and Goa and the union territory of Puducherry and employs 2,905 persons in business operations.

For the six month period ended on September 30, 2018, and the Financial Years 2018, 2017 and 2016, its total income was Rs. 153.17 cr., Rs. 334.93 cr., Rs. 435.46 cr. and Rs. 391.14 cr. and profit/ (loss) after tax, for the above periods, was Rs. 11.02 cr., Rs. 14.25 cr. Rs. – (81.09) cr. and Rs. 9.78 cr. respectively. As on 30.09.18, its gross and net NPAs were down to 1.96% and 1.31% respectively. Post this issue its debt-equity ratio will be enhanced from 2.60 to 3.06.

For the purpose of onward lending and for repayment of interest and principal of existing loans and also for general corporate fund needs, MMFL is coming out with its debt offer of secured, redeemable, non-convertible debentures of face value of Rs.1000 each. The company is issuing NCDs aggregating up to Rs. 100 crore with an option to retain oversubscription up to Rs. 100 crore thus making overall issue size of Rs. 200 crore. The issue opens for subscription on 18.03.19 and will close on or before 16.04.19. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs 1000) thereon, thereafter.

This issue has the tenure of 480 days, 36 months and 60 months. It is offering coupon rates ranging from 9.25% to 10%. Interest payments mode is Monthly or Cumulative as per the choice of investors. The issue is to be applied via ASBA mode only and will be allotted in demat mode only.

The issue is rated IND BBB-/Stable by India Ratings and Research Pvt. Ltd.  It indicates that instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. Vivro Financial Services Pvt. Ltd. is the sole lead manager for this offer. Vistra ITCL (India) Ltd. is the debenture trustee while Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, NCDs will be listed on BSE.

Conclusion / Investment Strategy

Considering poor rating and erratic performance for past four fiscals, there is no harm in giving this debt offer a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Mar 16, 2019

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 prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. 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

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