Muthoot Finance 11.25% NCDs – November 2014 Issue

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

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

16 thoughts on “Muthoot Finance 11.25% NCDs – November 2014 Issue”

  1. Shiv – As almost year and a half has passed by since this article was written, could you pls present your views on the currently open NCDs, in a fresh article or as an update to this one? Thx, Bobby

  2. Sir

    This is in response to your mail regarding NCD in Muthoot Finance.
    Yes you will get back the principle when there is default. Currently our NCD issue is closed. This issue was oversubscribed for more than 300 crores.
    To invest in NCD you need to have Demat account. If you could tell your location, and Mobile number, it will be helpful for us to contact you and explain more.

    Ravi Kumar
    Relationship Executive
    Muthoot Finance

  3. dear sir,
    i want to invest in muthoot secured ncd as they r giving more than any bank fd and furthermore secure, that is in case of any default i will get my pinciple back. This is as i know, but if theres any other things pls notify me via e-mail (
    Anirban Aich

  4. Hello everyone ,

    I have few queries like I have made my mind to invest a good amount of money to invest in muthoot Finance but after your post I came to know that they offering 10.75% but till now I had an idea abt 11.25% . I am really not happy with this though no bank is giving more than 9% that’s y planned to withdrewd fixed deposit and invest in muthoot finance so please guide me if I should go for it or can have better investment plans than muthoot finance .


  5. Hi I am neethu working as an account executive of muthoot finance.we are offering better rate of interest compared to other nationalised banks .we are providing better customer service with smile and thank you.we are dealing 17 business division. For over 125 years; muthoot group has remained stead fast on its mission to bring a difference in the life of every indian, not just through its meaningful products and services but also by serving the community with honesty, integrity and commitment.

  6. Hello ,
    Thanks for the wonderful post. I am planning to invest in this NCD since long time as I am looking for monthly income. I want to know about risk factor involved anad is it recommended to invest huge amount in these kind of investment ? Is there any other secured options to get around 11% – 12% on your maoney other than NCD’s?.

    Lokesh ji , As you are investing in these funds since 5 years how are you receiving your payments and what are the tax liabilities of the returned amount ? Will they deduct TDS from the interest amount.

    This issue is ending on 18th december so I will really appreciate if , I will get early reply.


  7. Hello,

    I have been investing in Muthoot more than 5 years in thier NCD . I have not seen even a single payment got delayed

    I agree with Jalpesh Patel with current RBI and SEBI guidelines, debt investor is more safe today. And knowing the fact where Muthoot has been entering into Motor Loan, they are willing to balance their risk.

    I feel, with higher interest rate, investor can still think of investing in.

    Lokesh Gupta

  8. Hi Shiv,
    First of all, thanks for your write up on this NCD. It is quite informative just like your other articles.

    I would just like to share a personal view on these NCDs from Gold Loan companies. These companies are generally perceived to be riskier (which I agree) BUT I feel Muthoot (in 2014/15) is less riskier than Muthoot (in 2011/12) purely for a debt investor.

    The recent regulatory changes for NBFC reduces the RISK considerably (even Net profit as well, but debt investor will NOT worry so much about a fall in YoY/QoQ profit):

    1. Reducing the Loan to Value ratio for Gold loan cos from 80% earlier to around 65% now.

    2. RBI’s Recent regulation for increasing the Tier I capital adequacy (to 10%, not very sure) for NBFCs.

    3. Aligning the NPA provising norms for NBFCs with banks.

    4. And, the recent correction in Gold price from 32k to 26k also gives me comfort that GOLD may NOT fall below 18k in 2-3 years which around 30% reduction from current price. And the company should be able to absorb this much fall (considering 70% LTV ratio) even if its RISK management practices are very ordinary.
    May be, the company reports a loss for a few quarters in such a worse situation but my debt is still reasonably safe considering all these RBI regulations.

    I strongly feel Muthoot (in 2011/12) was more riskier than Muthoot (in 2014/15) for a debt investor. The growth is curtailed for Muthoot (in 2014/15) by these regulations but that is MORE a cause of concern for a share holder than for a debt investor.

    Please share your thoughts as well and let me know I’m missing something here?

    With Regards,
    Jalpesh Patel

    1. Hi Jalpesh,

      I agree with your views about Muthoot and reduced risks associated with Muthoot now as compared to risks involved a few years back. RBI issued all these guidelines for gold related NBFCs to safeguard investors and shareholders as a sharp fall in gold prices could have posed a huge risk for all these companies.

      Also, I think there are a few points which make Muthoot’s NCDs equally unattractive to me now.

      Firstly, rate of interest offered by Muthoot a few years back was higher than the rate of interest it is offering now. Secondly, rate of interest differential between Muthoot & banks has narrowed considerably. Thirdly, gold prices were rising then and opposite is the case now, which I think makes it a little riskier now. Fourthly, when financial condition of a company deteriorates, it is riskier for shareholders and bondholders both, although it is more riskier for the shareholders.

      I think, in a falling interest rate scenario, it is better to invest in debt mutual funds rather than NCDs of private sector companies.

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