Muthoot Finance NCD (Tranche I) issue review

Muthoot Finance Ltd (MFL), primarily a largest gold loan NBFC company in India, having diverse financial activities and wind mill business now is a frequent visitor to the debt market. MFL is once again coming out with its 17th debt offer. While the company is coming out with an issue of Rs 200 crore under Tranche I, it has shelf limit of Rs 2,000 crore covering offer of Rs 1,950 crore of fully secured NCDs and Rs 50 crore of Unsecured NCDs. The issue is opening for subscription on April 11, 2017 and will close on or before May 10, 2017.

Minimum application is to be made for 10 NCDs and in multiple of 1 NCD thereon, thereafter. Although allotment is available in demat as well as physical mode, trading will take place only in demat mode. This issue is rated ICRA AA/Stable and CRISIL AA/Stable. The rating of the Secured NCDs and Unsecured NCDs by ICRA and CRISIL indicates high degree of safety regarding timely servicing of financial obligations. Issue is jointly managed by Edelweiss Financial Services Ltd and A K Capital Services Ltd. IDBI Trusteeship Services Ltd is the Debenture Trustee and Link Intime India Pvt Ltd is the registrar to the issue. Post allotment, NCDs will be listed on BSE.

These NCDs have face value of Rs 1,000 each and the interest payment options are available in monthly, annually and cumulative modes and having tenures of 400 days, 18 months, 24 months, 38 months and 60 months depending on the choice of investors. It offers coupon rates ranging from 8.15 per cent to 9 per cent based on the tenure and the interest payment options. Post entire issue, its current debt equity ratio of 3.32 times will stand enhanced to 3.68 times. The company is going to use 75 per cent of the net proceeds of the issue for lending purpose and the balance for general corporate purpose.

Conclusion: Considering the status enjoyed by the company and the ratings, Investors looking for steady interest income may invest for medium to long term.

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