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Muthoottu Mini NCD June 2020 offer review (May apply)

Muthoottu Mini Financiers Ltd Logo
  • MMFL is a Muthoottu Mini group arm engaged in gold loan and other financial services.
  • This is the 8th offer from this company since FY14.
  • Its branch network expanded resulting in growth of business.
  • Issue rated as CARE BBB-/Stable. Such rating indicates moderate risk in servicing.
  • Financial performance shows mixed trends for top line but growing bottom line, which a bit surprising.
  • About Company:

    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 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 8th debt offer from this company.

    MMFL's Gold Loan portfolio as on September 30, 2019 and March 31, 2019, March 31, 2018 and March 31, 2017, comprises of 4,20,949, 3,75,665, 4,11,558 and 5,16,004 Gold Loan accounts respectively, aggregating to Rs 1621.69 cr., Rs 1350.13 cr., Rs 1554.33 cr. and Rs 1940.00 cr. respectively.

    As on March 31, 2020, MMFL had a network of 784 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 employed 3168 persons in business operations.

    Issue Details:

    For the purpose of onward lending and for repayment of interest and principal of existing loans(75%) and also for general corporate fund needs (25%), 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 sizes of Rs 200 crore. Issue opens for subscription on 03.06.20 and will close on or before 26.06.20. 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. MMFL is spending Rs 3.00 cr. for mobilizing Rs 200 cr.

    This issue has tenure of 480 days, 24 months, 36 months, 50 months, 60 months and 85 months. It is offering coupon rates ranging from 9.50% to 10.50%. Interest payments mode is Monthly or Cumulative as per the choice of investors. Issue is to be applied via ASBA mode only and will be allotted in demat mode only.

    Issue is rated CARE BBB-/Stable by CARE Ratings Ltd. It indicates that instruments with this rating are considered to have 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.

    Terms of the NCDs

    Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7
    Frequency of Interest Payment Monthly Monthly Cumulative Monthly Cumulative Monthly Cumulative
    Tenor 480 days 24 Months 24 Months 36 Months 50 Months 60 Months 85 Months
    Face Value/ Issue Price of NCDs Rs 1,000
    Mode of Interest Payment Through various options available
    Coupon Rate (Retail) 9.50% 9.75% NA 10.00% NA 10.50% NA
    Effective Yield 9.92% 10.20% 9.77% 10.47% 10.22% 11.02% 10.28%
    Amount on Maturity Rs 1,000 Rs 1,000 Rs 1,205 Rs 1,000 Rs 1,500 Rs 1,000 Rs 2,000
    Call and Put Not Applicable

    Financial Performance:

    For the last three fiscals, MMFL has posted total income/net profit (Loss) of Rs 435.46 cr. / Rs - (81.09) cr. (FY17), Rs 334.93 cr. / Rs 14.25 cr. (FY18) and Rs 298.15 cr. / Rs 20.96 cr. For these periods its net NPAs were 1.97%, 1.58% and 1.39% respectively. For H1 of FY20 it has posted net profit of Rs 4.73 cr. on total income of Rs 146.44 cr. As on 30.09.19 its net NPAs were 1.08%. While top line has shown mixed trends, its bottom line has shown improvements over the years, which is a bit surprising. As on 30.09.19 it's paid up equity capital of Rs 249.53 cr. is supported by free reserves of Rs 203.37 cr.

    Its current debt equity ratio of 3.26 will stand enhanced to 3.70 post this issue. (As on 30.09.19)

    Merchant Banker's Track Record:

    This merchant banker is a non regular player for primary markets. However, it has brought few debts and equity offers recently.

Conclusion / Investment Strategy

Considering poor rating and erratic performance for past few fiscals, there is no harm in giving this debt offer a miss. However, cash surplus/risk savvy investors may consider moderate investment as interest rates are lucrative amidst ongoing interest rate cut scenario. (Other).

Review By Dilip Davda on June 2, 2020

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.


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