Muthoot Finance Ltd, the leading gold loan company, is planning to raise Rs 790 crores through the issue of secured, redeemable, Non-Convertible Debentures (NCDs). The base issue size will be Rs 100 crore with an option to retain over-subscription of up to Rs 690 crore. The issue proceeds will be used primarily for the lending activities of the company.
Issue open, close dates
The Muthoot NCD issue opens on November 29 and closes on December 24. However, the company has an option to close it earlier or at an extended date. This might be decided by the board or the NCD committee.
There will be 10 investment options for these secured NCDs. These will come with monthly or annual interest pay-outs. Investors could opt for ‘on maturity redemption’ payments too. The effective yield for these NCDs will ranging from 9.25% to 10% per year.
The lead managers to the issue are Edelweiss Financial Services Ltd and A K Capital Services.
The issue has been rated by Crisil Ltd. and Icra Ltd. Both the rating agencies have awarded the NCDs a long-term debt rating of AA/stable. The rating scale denotes a ‘high degree of safety regarding timely servicing of financial obligations and low credit risk’.
Listing and allotment
The NCDs are proposed to be listed on the BSE. The allotment will be based on first come, first serve basis.
Commenting on the NCD issue, Muthoot Finance MD George Alexander Muthoot said, “The issue will help the company to have long-term funds and diversify the borrowing basket as well. The previous NCD issues were well received in the market and were over-subscribed. It provides an opportunity to retail and HNI investors, to whom we have allocated 80% of the total issue size, with stable and attractive long-term returns when there are only limited comparable alternative avenues for investments.”
This is an attractive NCD offer after the Edelweiss Financial Services Ltd (EFSL) NCD issue that got closed recently. The EFSL public issue of up to Rs 500 crore has been fully subscribed. The issue is said to have mobilised over Rs 515 crore.
The NCDs were offered with an effective yield of 9.90% per year for the 24 months NCD, 10.20% per year for the 39 months NCD, up to 10.40% for the 60 months tenure and 10.41% for the 120 months NCD (monthly option).
Given that bank deposits have lower interest rates, these NCDs seem like a good option for conservative investors. However, NCDs aren’t safe as a bank FD and they are illiquid.