Muthoot Finance Corporation presents an enticing investment opportunity with its upcoming NCD IPO. For investors seeking growth, stability, and attractive returns, this NCD IPO is truly exceptional. The launch date for this exciting opportunity is September 21, 2023.
As a prominent non-banking financial institution, Muthoot Finance Limited has a strong track record of delivering financial services. Now, it extends its offering to the public through Non-Convertible Debentures (NCDs). In this Blog, we will delve into what the Muthoot Finance Limited NCD IPO in September 2023 has to offer and why it deserves consideration for your investment portfolio.
Detailed Information of Muthoot Finance NCD IPO Tranche II September 2023
| Name of the Issuer | Muthoot Finance Limited |
| Tenure | Upto 60 Months |
| Coupon | Upto 8.00% + 1.00% (Category 3 and Category 4) |
| Yield | Upto 8.00% + 1.00% (Category 3 and Category 4) |
| Issue Open Date | September, 21, 2023 |
| Issue Closure Date | October, 06, 2023 |
| Face Value | Rs.1000 |
| Nature of the Instrument | Secured Redeemable Non- Convertible Debentures |
| Minimum Application | 10 NCDs (Rs.10,000.00) & multiple of 1 NCD thereof |
| Listing | BSE |
| Rating | [ICRA] AA+/Stable (pronounced as ICRA Double A plus rating with stable outlook) |
| Issue Size | Base Issue of Rs.100 Crores with a Green Shoe option of Rs. 600 Crores aggregating up to Rs. 700 Crores. |
| Allotment Date | 11th OCT 2023 |
| Listing Date | 13th OCT 2023 |
Issue Break up
| Category | Allocation | Amount In crores | |
| Base Issue | Issue | ||
| Institutional Investors | 5% | 5 | 35 |
| Non-Institutional Investors | 20% | 20 | 140 |
| HNI | 25% | 25 | 175 |
| Retail Individual Investors | 50% | 50 | 350 |
| Total | 100% | 100 | 700 |
About Issuer
Muthoot Finance Limited (MFL) stands as the flagship company within The Muthoot Group, a Kerala-based conglomerate engaged in a wide range of business sectors, including financial services, healthcare, education, and hospitality. Established in 1997, MFL holds the distinction of being India’s largest non-banking financial company (NBFC) focused on gold loans. As of June 30, 2022, its standalone loan assets total Rs. 56,689 crore and the company boasts an extensive network of 4,617 branches.
Muthoot Finance Limited predominantly conducts a significant portion of its operations in South India, where it derives 50% of its total gold loan portfolio as of March 31, 2022. In this region, gold loans have long been recognized as a viable means of accessing short-term credit. However, in recent years, MFL has expanded its presence beyond South India, broadening its reach and influence.
Products offered by Muthoot Finance Corporation
- Gold Loan
- Housing Loan and Vehicle Loan
Credit Strength of Muthoot Finance Corporation
- Market Leadership: MFL, with a 20-year track record, is India’s largest non-banking financial company (NBFC) specializing in gold loans, holding a substantial 99% of its portfolio in this sector. Their portfolio has been steadily growing, reaching Rs. 56,689 crores as of June 30, 2022, with a year-on-year growth of 7.7%.
- Pan-India Presence: MFL boasts an extensive network of 4,617 branches across India. South India, in particular, has a strong presence, with 60% of its branches located there, contributing to its well-established franchise in the region.
- Strong Foundation: The company benefits from the trusted Muthoot brand, experienced leadership, and robust internal control and audit systems, all of which are expected to support its future growth.
- Improved Standalone Gearing: Standalone gearing is a measure of a company’s debt in relation to its equity. MFL’s standalone gearing improved to 2.5 times as of June 30, 2022, from a higher figure, showing that the company has reduced its reliance on debt in its financial structure.
- Ability to Support Subsidiaries: MFL is in a strong position to provide the necessary capital to its subsidiary companies without negatively affecting its own financial health. This suggests that MFL can support its various business ventures without straining its own capital structure.
Graphical representation of the Company’s Profit Data from (2021-2023)
| Year | Total Income | Profit | AUM |
| 31-MAR-21 | 1,05,148.49 | 37,221.78 | 634649.24 |
| 31-Mar-22 | 1,10,323.24 | 53,093.54 | 7,05,546.88 |
| 31-Mar-23 | 1,05,572.12 | 46,664.26 | 7,26,198.14 |
The company’s operating profit took a hit in Q1 FY2023 because the operating cost ratio increased to 3.5%, up from 3.0% in FY2022 (and 3.3% in FY2021, or 4.3-4.6% during FY2017-FY2020). This increase was mainly due to higher advertising expenses and increased corporate social responsibility (CSR) costs.
However, the company’s overall earnings remained strong, thanks to consistently low credit costs in the gold loan business (less than 1% over the past decade with an average of 0.5%). Looking ahead, ICRA expects the net profitability to stabilize at 4.0-5.0% over the medium term.
Financial Table detailing different Series of NCDs issued by Muthoot Finance Corporation
| Series | I | II | III* | IV | V | VI | VII |
| Frequency of Interest Payment | Monthly* | Monthly* | Annual** | Annual** | Annual** | NA | NA |
| Tenor | 36 months | 60 months | 24 months | 36 months | 60 months | 36 months | 60 months |
| Base coupon rate(% per annum)(A) | |||||||
| NCD Holders in Category I, II, III & IV | 7.75% | 7.75% | 7.75% | 8.00% | 8.00% | NA | NA |
| Additional Incentive on Above Coupon (% per annum) on any Record Date as applicable to Category II,III & IV Investors (B) | |||||||
| NCD Holders in Category II,III & IV | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | NA | NA |
| NCD Holders in Category II, III & IV | |||||||
| Coupon (% per annum) for NCD Holders in Category I | 7.75% | 7.75% | 7.75% | 8.00% | 8.00% | NA | NA |
| Coupon (% per annum) for NCD Holders in Category II III & IV | 8.75% | 8.75% | 8.75% | 9.00% | 9.00% | NA | NA |
| Effective Yield (per annum) for NCD Holders in Category I | 7.75% | 7.75% | 7.75% | 8.00% | 8.00% | 8.00% | 8.00% |
| Effective Yield (per annum) for NCD Holders in Category II, III & IV | 8.75% | 8.75% | 8.75% | 9.00% | 9.00% | 9.00% | 9.00% |
| Redemption Amount (₹ / NCD) on Maturity for NCD Holders in Category I | ₹1000 | ₹1000 | ₹1000 | ₹1000 | ₹1000 | ₹1259.71 | ₹1469.33 |
| Redemption Amount (₹ /NCD) on Maturity for NCD Holders in Category II, III & IV | ₹1000 | ₹1000 | ₹1000 | ₹1000 | ₹1000 | ₹1295.03 | ₹1538.62 |
Conclusion
In summary, the forthcoming NCD IPO by Muthoot Finance Corporation Limited in September 2023 offers an attractive financial opportunity for potential investors. This chance enables individuals to invest in non-convertible debentures, which could potentially yield appealing profits.
However, similar to all investments, it comes with inherent risks. Therefore, it is imperative for investors to thoroughly evaluate their investment goals, risk tolerance, and the terms of the NCDs before making a decision to participate.