Muthoot Finance is one of the largest Gold Loan NBFCs in India. It provides personal loans and business loans secured by gold jewelry, primarily to individuals like small businessmen, vendors, traders, farmers, and salaried individuals, who possess gold jewelry but are not able to access formal credit within a reasonable time, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements. . According to the ICRA Analytics Industry Report 2021, as of March 31, 2021, Muthoot Finance’s branch network was the largest among gold loan NBFCs in India. The company’s Gold Loan portfolio as of September 30, 2022, comprised of approximately 8.16 million loan accounts in India that the company serviced through 4,641 branches across 22 states, the national capital territory of Delhi, and six union territories in India. As of September 30, 2022
Muthoot Finance Limited is coming out with a debt offering of Secured Redeemable Non-Convertible Debentures with the face value of Rs. 1000 each, a Base Issue size of ₹ 75 Crore, and an option to retain oversubscription up to ₹ 225 Crore aggregating up to ₹ 300 crores, being the Tranche-IV Issue size. The issue opens for subscription on Monday, 28th November 2022, and will close on or before Monday , 19th December 2022. The allotment is on a first come first serve basis with the minimum application to be made is of 10 NCDs. A minimum of 75% of the Net Proceeds raised through this Tranche III Issue will be utilized For the purpose of lending and the remaining 25% for general corporate purposes.
Muthoot Finance Limited NCD Details
| Tranche IV Issue opens: | Monday, 28th November 2022 | ||||
| Tranche IV Issue closes: | Monday, 19th December 2022 | ||||
| Allotment: | First Come First Serve Basis | ||||
| Face Value: | Rs.1,000 per NCD | ||||
| Nature of Instrument: | Secured Redeemable Non-Convertible Debentures | ||||
| Minimum Application: | 10 NCDs (Rs.10, 000) & in multiple of 1NCD | ||||
| Listing: | Proposed on BSE | ||||
| Credit Rating | “AA+/Stable” by ICRA | ||||
| Tranche-IV Issue Size | Base Issue size of ₹ 75 Crore with an option to retain oversubscription up to ₹ 225 Crore aggregating up to ₹ 300 crore
Being the Tranche-IV Issue size. |
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| Put/Call Option | There is no put/call option for the NCDs | ||||
| Category | I – Institutional (“QIB”) | II – Non-Institutional (“Corporates”) | II – High Net worth
Individual (“HNI”) (Amount aggregating to above ₹ 10 lakh) |
II – Retail Individual (“Retail”) (Amount aggregating up to and including ₹ 10 lakh) | |
| Category Allocation of the overall Issue Size | 5% | 5% | 40% | 50% | |
| Bucket Size (₹) assuming Issue size of ₹ 300 Cr₹ | ₹ 15 Cr | ₹ 15 Cr | ₹ 120 Cr | ₹ 150 Cr | |
Specific Terms of the Prospectus:
The terms of the NCDs offered under the Issue are as follows:
| Series | I | II | III | IV | V | VI | VII |
| Frequency of Interest Payment | Monthly | Monthly | Annual | Annual | Annual | Cumulative | Cumulative |
| Tenor | 36 months | 60 months | 24 months | 36 months | 60 months | 36 months | 60 months |
| Base Coupon Rate (% p.a.) (A) for NCD Holders in: | |||||||
| Category I, II, III & IV | 7.35% | 7.50% | 7.25% | 7.60% | 7.75% | NA | NA |
| Additional Incentive on Base Coupon (% per annum) on any Record Date as applicable to Category III & IV Investors (B) NCD Holders in: | |||||||
| Category III & IV | 0.50% | 0.50% | 0.50% | 0.50% | 0.50% | NA | NA |
| Aggregate of the Coupon Rate and the additional incentive above the Coupon Rate on any Record Date as applicable to Category III and Category IV investors {(A) + (B)} | |||||||
| Category I, & II | 7.35% | 7.50% | 7.25% | 7.60% | 7.75% | NA | NA |
| Category III & IV | 7.85% | 8.00% | 7.75% | 8.10% | 8.25% | NA | NA |
| Effective Yield (% p.a.) for : | |||||||
| Category I & II | 7.35% | 7.50% | 7.25% | 7.60% | 7.75% | 7.60% | 7.75% |
| Category III & IV | 7.85% | 8.00% | 7.75% | 8.10% | 8.25% | 8.10% | 8.25% |
| Amount (₹ / NCD) on Maturity for ^ : | |||||||
| Category I & II | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,245.77/- | ₹ 1,452.40/- |
| Category III & IV | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,000/- | ₹ 1,263.21/- | ₹ 1,486.41/- |
As regards the payment of additional incentive, such additional incentive shall be payable to only such NCD Holders who shall be individuals as on the Record Date.
Muthoot Finance Limited NCD
Application form
Strengths of the company:
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A long operating history, track record, management expertise, and Promoter support have established a strong brand name for it in the markets it serves. A strong brand name has contributed to its ability to earn the trust of individuals who entrust it with their gold jewelry and can be a key factor allowing it to expand.
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Company has an AUM as of June 30, 2022, of Rs. 56,689.2 crores, and the number of Active customers as of June 30, 2022, are 51,73,166.
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PAT to Avg. Loan Assets of Q1 FY2023 are 7.24, Capital Adequacy Ratio of 30.62, EPS of 19.98, and a Price-To-Earnings ratio of 10.7
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The issue is rated ICRA AA+/Stable by ICRA Ltd. Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk*.
Risk factors:
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Increasing competition may have an adverse effect on the net interest margin, and, if the company is unable to compete successfully, its market share may decline.
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Interest rates are sensitive to many factors, including the RBI’s monetary policies, domestic and international economic and political conditions, and other factors. If the company fails to adequately manage the interest rate risk in the future it could have an adverse effect on the net interest margin, thereby adversely affecting the business and financial condition.
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Customer base comprises entirely of individual borrowers, who generally are more likely to be affected by declining economic conditions than large corporate borrowers. Any decline in the repayment capabilities of the borrowers may result in an increase in defaults, thereby adversely affecting the business and financial condition.
Conclusion:
The coupon rates offered by the company amidst the rising interest rate scenario following higher inflation are fairly low. However, it could be a good deal for an investor looking for a regular income as it is an ICRA AA+/Stable by ICRA Ltd rated debt offer. The issue is to be done in Demat form only so the investor must open a Demat account with a trusted broker like Elite Wealth.