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Muthoottu Mini NCD Sept 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 9th offer from this company since FY14.
  • Its branch network expanded resulting in growth of business.
  • Issue rated as IND 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 9th debt offer from this company.

MMFL's Gold Loan portfolio as on as on March 31, 2020, March 31, 2019 and March 31, 2018 comprises

of 4,37,182, 3,75,665 and 4,11,558 Gold Loan accounts respectively, aggregating to Rs 1644.80 cr., Rs 1350.13 cr. and Rs 1554.33 cr. which is 97.26%, 97.50% and 95.31% of its total loans and advances as on such specific dates.

As on March 31, 2020, MMFL had a network of 785 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 3109 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 September 09, 2020 and will close on or before October 06, 2020. 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 3.30 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% (same as pervious NCD offer of June 2020). 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 IND BBB-/Stable by India 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

Tenure 480 Days 24 months 24 months 36 months 50 months 60 months 85 months
Nature Secured
Frequency of Interest Payment Monthly Monthly Cumulative Monthly Cumulative Monthly Cumulative
Minimum Application 10 NCDs (Rs 10,000) (across all options of NCDs)
In multiples, of 1 NCD after the minimum application
Face Value of NCDs (Rs /NCD) Rs 1,000
Issue Price (Rs /NCD) Rs 1,000
Mode of Interest Payment/ Redemption Through various options available
Coupon (%) per annum in Category I, II and III 9.50% 9.75% NA 10.00% NA 10.50% NA
Coupon Type Fixed
Redemption Amount (Rs /NCD) for NCD Holders in Category I, II and III 1,000 1,000 1,205 1,000 1,500 1,000 2,000
Effective Yield (%) (per annum) - Category I, II and III 9.92% 10.20% 9.77% 10.47% 10.22% 11.02% 10.28%
Put and Call Option Not Applicable

Financial Performance

For the last three fiscals, MMFL has posted total income/net profit of Rs 334.93 cr. / Rs 14.25 cr. (FY18) and Rs 298.15 cr. / Rs 20.96 cr. (FY19) and Rs 313.15 cr. / Rs 33.54 cr. (FY20).

Gross non-performing loan assets were 1.89%, 2.16% and 2.09% of MMFL's gross loan portfolio under management for the Fiscals 2020, 2019 and 2018, respectively. As on March 31, 2020 its net NPA stood at 1.34%.

As on March 31, 2020 it's paid up equity capital of Rs 249.53 cr. is supported by free reserves of Rs 232.08 cr.

Its current debt equity ratio of 3.20 will stand enhanced to 3.61 post this issue. (As on March 31, 2020)


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 average financial performance so far, 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 September 8, 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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