This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at firstname.lastname@example.org
Launched today, Muthoot Finance has once again decided to raise money from its public issue of non-convertible debentures (NCDs). The issue offering interest rates between 10.75% to 11.25% will raise Rs. 400 crore for the company, including the green shoe option of Rs. 200 crore. The issue will run for a month to close on December 18th.
Like its previous issue in September 2014, the company is offering eleven interest payment options with maturity periods ranging from 400 days to 78 months. Highest effective yield it will carry is 11.25% per annum and that comes with the 36 months holding period. Unlike other companies, Muthoot is not offering any additional coupon rate for the existing shareholders or bondholders.
“Double Your Money” Option – Like its previous offering, Muthoot is offering to double your investment amount in 78 months. Kisan Vikas Patra (KVP), which the government relaunched yesterday, offers to double your investment amount in 100 months. But, as the KVPs are issued by the post offices, they are considered to be risk-free. So, it would be unwise to compare these NCDs with KVPs.
Coupon Rates for Non-Individual Investors – Like always, Muthoot will offer a lower rate of interest to its non-individual investors to the tune of 0.75% per annum.
Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and 90% of the issue size has been reserved for the retail investors:
Category I – Institutional Investors – 5% of the issue is reserved
Category II – Non-Institutional Investors, Corporates – 5% of the issue is reserved
Category III – Retail Individual Investors including HUFs – 90% of the issue is reserved
NRI Investment – Like its previous issue, non-resident Indians (NRIs) are not eligible to invest in this issue.
Ratings & Nature of NCDs – ICRA has rated this issue as ‘AA-’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature, except those which promise to double your money in 78 months. In case of any default, investors of the secured NCDs could have a claim against certain assets of the company.
Minimum Investment – To invest in these NCDs, the investors need to invest a minimum amount of Rs. 10,000 i.e. 10 NCDs of Rs. 1,000 face value.
Listing – Muthoot will get these NCDs listed on the Bombay Stock Exchange (BSE) within 12 days from the date the issue gets closed.
Demat/Physical Option – Though the investors have the option to apply for these NCDs in physical form as well as demat form, this option is limited to NCDs under options I to VI. Applicants will not be able to apply for allotment of these NCDs in physical form under options VII to XI i.e. these NCDs will be allotted only in dematerialised form under options VII to XI.
As the US economy is improving steadily, dollar has strengthened against all major currencies of the world and with dollar getting stronger, gold prices are on a decline in the international market. Also, there are no signs of a reversal either.
With gold prices coming down, gold financing firms are struggling to keep their revenues and profitability in good shape. So, with the business environment getting tougher for these companies and interest rate getting unattractive, it is better not to invest in such an issue.
Application Form of Muthoot NCDs
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in Muthoot NCDs, the investors can reach us at +919811797407