Muthoot Finance NCD – Should I invest? August 24th, 2011 Posted in Investments
Muthoot Finance, India’s largest gold loan provider has entered with a maiden public issue of Secured Redeemable Non Convertible Debentures with a face value of Rs 1000 each and aggregating up to a total of Rs 1000 crores.
About Muthoot Finance
Muthoot Finance is India’s largest gold loan provider. The company’s gold loan portfolio as on March 31, 2011, comprised 47 lakh loan accounts serviced through 2,733 branches across 20 states and four union territories.
Gold loans account for 99 per cent of Muthoot’s assets under management with predominant exposure to South India.
Muthoot Finance NCD – Issue open and close date
The issue opens on August 23 and close on September 5.
Muthoot Finance NCD – Subscription
15 per cent of the NCDs were reserved for institutional investors while 25 per cent would be reserved for non-institutional investors. The balance of 60 per cent of the issue was for retail investors, upto Rs. 5 lakh
Muthoot Finance NCD – Issue proceeds
The funds raised through this issue will be utilised for various financing activities including lending and investments, to repay existing liabilities and to meet working capital requirements.
Muthoot Finance NCD – Investment Options
The issue provides three investment options to the investors. The NCD Issue has 3 investment options (2 yrs, 3 yrs and 5 yrs).
Option 1 – 2 years
Maturity date is 24 months from the date of allotment and the coupon rate is 11.75 per cent per annum.
Option 2 – 3 years
Maturity date is 36 months and the coupon rate is 12 per cent.
Option 3 – 5 years
Maturity date is 60 months and the coupon rate is 12 per cent.
Muthoot Finance NCD – Rating
Both ICRA and Crisil have given AA-/Stable ratings.
Muthoot Finance NCD – Should I invest?
The rate offered by Muthoot Finance NCD is attractive considering the rising interest rate regime and the increasing uncertainty in the equity markets. With a A rating by Crisil, the NCD reflects reflects the MFL-MCSL combine’s rich experience in financing against gold, strong asset quality, and good earnings profile. Out of the three investment options available, the two year investment option is the most attractive and we advise investors with a medium risk appetite to invest in Muthoot Finance NCD with a 2 year option.
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