Pull your socks and stay ready to invest in IPO. Muthoot Finance Limited NCD IPO is going live from Thursday, May 25, 2022. A tough competition is expected among investors for the bidding. It is a good opportunity for investors looking for a yield of up to 8% on their investment. The allotment is purely on first-cum-first serve basis. The Face Value of Muthoot Finance Limited NCD IPO is Rs. 1000 each.
The issue closes on Friday, June 17, 2022,*. It has an “ICRA AA+/Stable” rating and assures a yield of up to 8%. You can make an application for a minimum of 10 NCDs valuing Rs. 10,000 & in multiple of 1 NCD.
Issue size – Public Issue by the Company of secured redeemable non-convertible debentures of the face value of ₹ 1,000 each for an amount of ₹ 75 crores (“Base Issue Size”) with an option to retain oversubscription up to ₹ 225 Crores aggregating up to 30,00,000 NCDs amounting to ₹ 300 Crores.
Issue Break up –
| CATEGORY | ALLOCATION | Amount in Crs | |
|---|---|---|---|
| BASE ISSUE | ISSUE | ||
| Institutional Investors | 5% | 3.75 | 11.25 |
| Non-Institutional Investors | 5% | 3.75 | 11.25 |
| HNI | 40% | 30.00 | 90.00 |
| Retail Institutional Investors | 50% | 37.50 | 112.25 |
| TOTAL | 100% | 75.00 | 225.00 |
*Issue may close on such earlier date or an extended date as may be decided by the Board of Directors of the Company and Securities Issuance Committee thereof.
About the NCD Issue (company stats, standings, etc.)
Muthoot Finance Limited (MFL) is the flagship company of the Kerala-based business house. It has diversified operations in financial services, healthcare, education, and hospitality. MFL was incorporated in 1997 and is India’s largest gold loan-focused NBFC with total loan assets (standalone) of ₹. 54,688 crore and 4,617 branches as of December 31, 2021. The company derives a major portion of its business from South India (50% of the total gold loan portfolio as of December 31, 2021), where gold loans have traditionally been accepted as a means of availing short-term credit, although it has increased its presence beyond South India over the last few years.
MFL reported a standalone net profit of ₹. 2,994 crores on an asset base of ₹. 66,831 crores in 9M FY2022 against a net profit of Rs. 3,722 crores on an asset base of ₹. 63,465 crores in FY2021. The consolidated portfolio stood at ₹. 60,896 crores as of December 31, 2021. compared to ₹. 58,280 crores as of March 31, 2021 (₹. 46,871 crores as of March 31, 2020), of which gold, housing, and microfinance accounted for 90%, 3%, and 6%, respectively.
Products
- Gold Loans
Company Financials
- ASSETS UNDER MANAGEMENT (AUM) – ₹. 66,831 Crores
- GROSS NON-PERFORMING ASSETS (GNPA) – 3.8%
- NET NON-PERFORMING ASSETS (NPA) – 3.4%
THE ISSUE STRUCTURE
| Series | I | II | III | IV | V | VI | VII |
| Frequency of Interest payment | Monthly | Monthly | Annually | Annually | Annually | Cumulative | Cumulative |
| Tenure | 36 Months | 60 Months | 36 Months | 60 Months | 84 Months | 36 Months | 36 Months |
| Coupon Rate Category I & II | 6.75% | 7.00% | 7.00% | 7.25% | 7.50% | NA | NA |
| Coupon Rate Category III & IV | 7.25% | 7.50% | 7.50% | 7.75% | 8.00% | NA | NA |
| Effective Yield Category I & II | 6.75% | 7.00% | 7.00% | 7.25% | 7.50% | 7.00% | 7.25% |
| Effective Yield Category III & IV | 7.25% | 7.50% | 7.50% | 7.75% | 8.00% | 7.50% | 7.75% |
| Amount of Maturity Category I & II | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | 1,225.04 | 1,419.01 |
| Amount of Maturity Category III & IV | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | 1242.30 | 1,452.40 |
*Including additional incentive on Base Coupon Rate (% per annum) on any Record Date as applicable to Category III and Category IV investors.
The Company would allot the Option III NCDs, as specified in the Tranche II Prospectus to all valid Applications, wherein the Applicants have not indicated their choice of the relevant option of NCDs.
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.
Key Strengths
- Established franchise and leadership position in the gold loan segment
The company has a track record of around two decades in the gold loan business and is India’s largest gold loan focussed non-banking financial company (NBFC) with a total portfolio of ₹. 54,688 crores (of which 99% is a gold loan) as of December 31, 2021; the portfolio grew by 8.5% on a year-on-year (YoY) basis. The consolidated portfolio stood at ₹. 60,896 crores in December 2021 compared to ₹ 55,800 crores in December 2020, of which gold, microfinance, and housing accounted for 90%, 6%, and 3%, respectively. As of December 31, 2021, the company has an extensive pan-India network of 4,617 branches; 60% of its branches are in South India, where it has an established franchise.
- Track record of healthy earnings performance
The company’s consolidated net profit remained healthy with the annualized PAT/AMA at 5.7% in 9M FY2022 and 6.1% in FY2021 (6.5% in FY2020). The consolidated net profit remained in the range of 5.5-6.5% between FY2018 and 9M FY2022. The annualized net interest margin was lower in 9M FY2022 and FY2021 at 10.7% and 11.4%, respectively, vis-à-vis ~13% and 12.9% in FY2020 and FY2019, respectively, because of the higher on-balance sheet liquidity as well as the reduction in loan yields.
- Capitalization to remain comfortable over the medium term
The Company has a comfortable capitalization profile with a standalone gearing of 2.8 times and 3.1 times as of December 31, 2021, and March 31, 2021 (3.2 times as of March 31, 2020), respectively, aided by good internal capital generation. The consolidated managed gearing stood at 3.0 times as of December 2021. The company’s standalone net worth was ₹. 17,412.2 crores as of December 31, 2021 (₹. 15,238.9 crores as of March 31, 2021). The company is expected to be comfortably placed to meet the medium-term capital requirements of its subsidiaries without affecting its own capital structure.
Credit Risks
- Performance of non-gold segments to remain monitorable; sizeable share of gold loans would support overall portfolio quality
The Company’s standalone portfolio almost entirely consists of gold loans and it has diversified its exposure via its subsidiaries, namely Belstar Microfinance Limited (Belstar; microfinance), Muthoot Homefin (India) Limited (MHL; affordable housing), and Muthoot Money Limited (MML; vehicle finance). The consolidated portfolio is currently concentrated on gold loans, comprising 90% of the loan book while microfinance, affordable housing, and vehicle finance accounted for 6.3%, 2.6%, and 0.4%, respectively, as of December 31, 2021.
- Operations concentrated in South India
The Company’s operations are largely concentrated in South India, which constituted 60% of its total branch network and 50% of its total gold loan portfolio as of December 31, 2021. Although the share of the portfolio in South India has reduced from 57% in March 2015. Geographical diversification is expected to improve steadily over the medium to long term with an improvement in the scale of the gold loan portfolio and the stabilization of the performance of the non-gold asset segments.
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