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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