Muthoot Finance is coming out with a public issue of  secured redeemable non convertible debentures (NCDs) of face value of Rs 1,000 each aggregating Rs 1,950 crore and unsecured NCDs of face value of Rs 1,000 each aggregating Rs 50 crore, totaling up to Rs 2,000 crore. The Muthoot Finance NCD tranche issue is with a base issue size of Rs 200 crore with an option to retain subscription up to shelf limit of Rs 2,000 crore. Muthoot Finance NCD issue has ten investment options for secured NCDs with monthly or annually interest payment frequency or on maturity redemption payments with the yield from 8-9 % annually.

Muthoot Finance NCD Issue
Muthoot Finance NCD issue:
NCD Type Secured and Unsecured Redeemable Non-Convertible Debentures
(The Unsecured NCDs will be in the nature of Subordinated Debt and will be eligible for inclusion as Tier II Capital.
Issue DateThe Issue shall be open from Tuesday, 11th April 2017 to Wednesday, 10th May  2017
 Issue SizeBase Issue Rs.200 Crore with an option to retain oversubscription up to the Shelf Limit of Rs.2,000 crores.
 
(Secured NCDs for an amount up to Rs.1,950 crores and Unsecured NCDs for an amount up to Rs.50 crores)
Face ValueRs.1,000/-
Minimum Application SizeRs.10,000/-  ( 10 NCDs) thereafter  in multiples of Rs.1000/-(1 NCD) for all Options of NCDs.
Credit Rating“AA-/Stable” by ICRA  and CRISIL
Subscription Details
Subscription: Muthoot Finance NCD  ( x times)
For Total Issue Size of 2000 crore (base size 200 cr)
 CATG 1CATG 2CATG 3CATG 4 
 QIBNIIHNIRetailTotal
Day 3     
Day 2      
Day 100.021.740.960.82



About Muthoot Finance:

Muthoot Finance Ltd (MFL) is the flagship company of the Kerala based business house ‘The Muthoot Group’, which has diversified operations in financial services, healthcare, real estate, education, hospitality, power generation and entertainment. MFL has a long and established track record of operating in the gold loan business and is India’s largest gold loan focused NBFC with a managed advance base of Rs. 26,963 crore as on December 31, 2016. The company operates through an extensive pan-India branch network of 4,308 as on December 31, 2016. The company derives a major proportion of its business from South India (52% of total portfolio as on December 31, 2016) where gold loans have traditionally been accepted as means of availing short term credit, although over the past few years it has increased its presence beyond South India.

MFL achieved a standalone net profit of Rs. 858.1 crore (unaudited) on an asset base of Rs. 30,550 crore during 9MFY2017 against a net profit of Rs. 544.3 crore on an asset base of Rs. 28,140 crore during 9MFY2016.

Earlier Issues 
Muthoot Finance  had earlier approached the markets in Jan 2017 with an issue of secured and unsecured NCDs with an option to retain 1400 crores. The debentures at that time carried a rating of AA- by ICRA and AA (Stable) by Crisil. The NCDs offered various options including 9.25% interest option. This time both ICRA and CRISIL have given AA(Stable) rating to the issue.

Muthoot Finance NCD Issue Structure

Category

I – Institutional (“QIB”)

II – Non Institutional 

II – Individual (“HNI”)

(Amount above Rs.10 lacs)

II – Retail Individual (“Retail”)

(Amount  up to Rs. 10 lacs)

Category Allocation

20% of the overall Issue Size.

20% of the overall Issue Size.

30% of the overall Issue Size.

30% of the overall Issue Size.

Bucket Size based on Issue  of  Rs.2,000 Crs

Rs.400 Crores

Rs.400 Crores

Rs.600 Crores

Rs.600 Crores

 Annual /Monthly Interest payable Option
 IIIIIIIVVI
Tenor2 years38 Months5 years
Interest PaymentMonthlyAnnuallyMonthlyAnnuallyMonthlyAnnually
Type SecuredSecuredSecuredSecuredSecuredSecured
Rate of Interest for
Individual Investors
8.25.%8.50.%8.50.%8.75.%8.75.%9.00.%
       
Cumulative
option / seriesVIIVIIIIXXXI
Tenor400 days18 months2 yrs38 months96  months
Interest PaymentCumuCumuCumuCumuCumu
Type SecuredSecuredSecuredSecuredUn-secured
Rate of Interest 8.00.%8.15.%8.25.%8.50.%9.06.%:
Assessment
  • Muthoot Finance had earlier approached the markets in Jan 2017 with an issue of secured and unsecured NCDs with an option to retain 1400 crores. The debentures at that time carried a rating of AA- by ICRA and AA (Stable) by Crisil. The present issue of NCDs has been rated AA both by ICRA & Crisil.
  • Though Muthoot Finance NCD issue of Jan 2017 was subscribed on opening day, it hardly commands any regular volumes  making it illiquid.
  • The Muthoot Finance NCD issue provides opportunities to institutions and QIB and High net worth Individuals to buy these debt instruments at attractive rate of 9% coupon. Retail investors who are not comfortable in purchasing from secondary market may also likely to apply for this issue.
  • While there is little doubt of Muthoot Finance NCD issue getting a good response, there are much better opportunities available in secondary markets , some of which have been covered in the post Click Here for Details
  •  NCDs are taxable, thus the return get reduced by individual’s Tax bracket.
  • Some investors are able to get upfront brokerage from brokers in range 1% which increases the YTM (Yield to Maturity) by a percent.
  • Muthoot Finance NCD is just OK for those reatil / retired investors who are looking for a regular monthly / annual income and are not conversant with buying BCDs from stock markets. For others it not a very attractive proposition given thin trading in earlier issue and better opportunities available in secondary market.