Muthoot Finance Limited NCD – 13% plus Fix returns

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Apart from attractive rates, the secured nature of Muthoot's lending (loans against gold) offers some margin of safety in terms of loan to value, investment grade rating (CRISIL AA-) and strong track record with 70 years of experience in gold financing business support the investment. An AA- rating is defined as carrying “very low credit risk”.

Investors can avoid the three year and five year instruments as the 0.25 percentage point higher than the two year rate of interest doesn't really make up for the risks of holding on for a longer tenure.

ABOUT THE COMPANY

Gold loans account for 99 per cent of Muthoot's assets under management with predominant exposure to South India. It has a low proportion of non-performing asset (gross NPA ratio of 0.31 as of June 2011) thanks to gold as collateral. Muthoot has made profits in at least last seven fiscal years. It has 120 tonnes of gold against which it lent at average loan-to-value of 72 per cent. The issue also gives comfort from the gold price movement perspective. Gold prices may continue to remain firm for some time given its safe haven status.

The assets under management are close to Rs 18,000 crore. The interest spreads (difference between interest earned and interest expended) of Muthoot was 10.9 per cent for the quarter ended June 2011. The company has been raising money from retail investors for quite some time through private placement of secured NCDs. As of June 2011, retail NCD borrowings accounted for 26 per cent of overall borrowing. The capital adequacy ratio of Muthoot is strong at 19.2 per cent as of June 2011 as against mandatory requirement of 15 per cent.

Issue opening date – 22 Dec 2011
Issue Closing date – 7 Jan 2012
Issue size – INR 300 Crore with an option to retain oversubscription upto INR 300 Crore aggregating to a total of INR 600 Crore.
Instrument – Public issue of Secured Non- Convertible Debenture (NCD)
Ratings – AA-/Stable by both Crisil & CARE
Face Value – INR 1000/NCD
Minimum Application – 5 NCD = INR 5000
Listing - BSE

Coupon Rate %	I	II	III	IV (Yield)
	13%	13.25%	13.25%	13.43%
Tenor	24 Months	36 Months	60 Months	66 Months
Interest Payment	Annual	Annual	Annual	Cumulative

A WORD OF CAUTION

Muthoot Finance is the fifth non-banking finance company (NBFC) to come up with a public issue of NCDs in the last couple of months. It is also fourth company in as many weeks to hit the market with secured NCD issue. Given such high dose of NCD issuances, investors should avoid allocating too large a portion of their portfolio to such NCDs.

How to apply to Muthoot Finance NCD?
You can download the forms below

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Submit the filled up form to Collection canter near you

Muthoot Finance NCD

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About Muthoot Finance Limited
Muthoot Finance Ltd is a NBFC incorporated in 1997 primarily provides loan against household used jewellery and offers other products and services like money transfer, insurance, securities, foreign exchange, vehicle and asset finance services. Gold loans account for 99% of Muthoot’s assets under management with predominant exposure to South India.

Issue Size
The company plans for a public issue of secured, redeemable, non-convertible debentures (NCDs) of face value of Rs 1,000 each aggregating upto Rs 300 crore with an option to retain over subscription up to Rs 300 crore, aggregating to a total of upto Rs 600 crore.

Objective of the issue: 
The funds raised through this Issue will be utilized for various financing activities including lending and investments, to repay existing liabilities or loans and towards business operations including capital expenditure and working capital requirements, after meeting the expenditures of and related to the issue and subject to applicable statutory/regulatory requirements.

Issue Dates:
Issue Open: Dec 22 2011
Issue Close: Jan 07 2012

Investment Options
There are 4 options through which investment can be made in Muthoot Finance NCD as described in the picture below.

Ratings
The NCDs under this issue have been rated as AA -/Stable by CRISIL and ICRA. The rating indicates a high degree of safety with regard to timely servicing of financial obligations on the NCDs and such instruments carry a very low credit risk.

Why Invest in Muthoot Finance NCD
The interest rate of 13-13.43% is being offered to individuals for duration of 2 years, 3 years, as well as 5 years, 5.5 years is an attractive opportunity when compared to bank deposits which offer interest rate ranging 9 - 10.25%. Unlike bank deposits there is no TDS for the interest rate payments. These are secured instruments and hence backed by assets of the company. The NCDs will be listed in the BSE and NSE hence there is a chance for capital appreciation in case the RBI starts reducing interest rates after some month.

How to apply to Muthoot Finance NCD?
You can download the forms below

Download Application Forms

Submit the filled up form to Collection canter near you

Muthoot Finance plans to Raise 600 crore via Bonds

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Muthoot Finance, country’s largest gold loan financing company, plans to raise 600 crore though public bonds sale as funding from banks get expensive after the central bank scratched out lenders against gold from the subsidised priority sector lenders’ list.

The issue will open on December 22, 2011, and close on January 7, 2012. The company is borrowing funds through two, three, five-year bonds and five-and-a-half year zero-coupon bonds.

It is cheaper to raise funds from public than to raise from banks. After the priority sector status on gold loans was removed by RBI, the loans have become expensive by 0.5.

He said that funds raised through the issue would be used to repay existing liabilities and towards lending and investment.

There are four investment options, including a 24-month plan, which will pay 13% coupon to different categories of investors, while 36-month and 60-month maturities will both pay a coupon of 13.25%. A 66-month option will pay a coupon of 13.43% to different categories of investors. The face value of each NCD is 1,000 and the minimum application is for five NCDs and in multiples of each NCD thereafter, the company said.

How to apply to Muthoot Finance NCD?
You can download the forms below

Download Application Forms

Submit the filled up form to Collection canter near you