Manappuram Finance NCD

Manappuram Finance NCD issue (tranche 1) comprises of base issue size of  Rs 200 crore with an option to retain oversubscription up to Rs 800 crore, thus aggregating up to Rs. 1000 crore.  The secured NCDs which are  in 10 options, and interest rates vary between 9.6% and 10.4%. Manappuram Finance is one of India’s leading gold loan NBFCs.

Issue Offer Period : The tranche 1 of the NCD  issuehas  for subscription on 24th October  2018 and is scheduled to close on November 22, 2018 with an option of early closure or extension. 

About Manappuram Finance :
Manappuram Finance Ltd. is one of India’s leading gold loan NBFCs. Incorporated in 1992, Manappuram Finance Ltd. has grown at a rapid pace.  The Thrissur  based company owes it origins to 1949,  and  Shri. V.P. Nandakumar, the current MD & CEO, took the reins from his father in 1986.
In 2011 Company adopted the name, Manappuram Finance Ltd., in place of the earlier ‘Manappuram General Finance and Leasing Ltd.’. Its  Fund–based and fee–based services include security loans, gold loans, personal loans, instant money transfers, foreign exchange, bonds, non–convertible debentures, life insurance, general insurance, hire purchase and leasing schemes. The company, through its subsidiary, Manappuram Insurance Brokers Pvt, Ltd, also provides life insurance products; and general insurance products, such as motor, health, travel, and property and liability insurance. Further, it acts as agent for housing loan and car loans of banks. The company has  4208 branches  with AUM of of Rs. 166 billion .
Manappuram Finance NCD issue Structure

Manappuram Finance NCD issue is structured into following categories of Investors: 
Category I – QIBs– 10% of issue
Category II – Non-Institutional Investors – 10% of issue
Category III – HNIs i.e. above Rs. 10 lakhs – 30% of issue
Category IV –Individuals including HUFs – 50% of issue

Series

TenorFrequencyCouponEff YieldRedemption
Amount
I400 DaysCumulative 9.70%1106.83
II36 MonthsMonthly9.60%10.02%1000
III60 MonthsMonthly10.00%10.46%1000
IV24 MonthsAnnual9.85%9.85%1000
V36 MonthsAnnual10.00%9.99%1000
VI60 MonthsAnnual10.40%10.39%1000
VII24 MonthsCumulative 9.85%1206.81
VIII36 MonthsCumulative 10.00%1331.52
IX60 MonthsCumulative 10.40%1640.82
X2557 DaysCumulative 10.40%2000
  • Rs. 10,000 is the minimum amount to invest in this issue.
  • Rating: “CARE AA/Stable” and “BWR AA+ /Stable”
  • The NCDs are Secured in nature.
  • Listing at BSE only. 
  • Allotment will be made on a first-come first-served basis.

Manappuram Finance:Financial Snapshot
Parameter Figures
Market Cap (in ₹ Cr.)6,148.30
EPS  (TTM)8.13
Price To Earnings (P/E) 8.97
Book Value Per Share 45.27
Price To Books (P/B) 1.61
EBIT Margin (%)63.44
PAT Margin (%)23.91
ROCE (%)14
Total Debt to Equity (D/E)2.68
Assessment:

  • NCDs are taxable, thus the return get reduced by individual’s Tax bracket. 
  • TDS is not deducted if NCDs are held in Demat form.
  • Manappuram Finance has a track record of stable growth and has maintained good quality of assets.
  • NCD are safer than Fixed deposit but carry the risk that the issuer may not be able pay the interest payments. This is not normal but can happen under extraordinary conditions.
  • Events surrounding the Default by IL&FS and subsequent pressure in equity market on HFCs and NBFCs accompanied  by considerable panic in debt market related to NCDs of DHFL, India Bulls group and higher yields for other NCDs has considerably shaken Investors confidence in Corporate NCDs. However Muthoot & Manappuram Finance in my view are better placed due to underlying Gold Loan business. 
  • Even though Manappuram Finance business is against Gold Loans which is better protected than other HFCs and NBFCs, some is still advised and those with not much exposure to NCDs can consider to apply in the Manappuram Finance  NCD issue.
  • My preference is is for shorter duration options in Manappuram Finance NCD issue as interest rates could harden over the long run and many times company’s profitability in the long run cannot be predicted.
Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.