Mahindra & Mahindra Financial Services (MMFSL) has come out with a public issue of secured & unsecured redeemable non-convertible debentures. The offer is to raise up to Rs 3,500 crore from investors. The NCD issue opens on January 4 and is slated for closure on January 25. RupeeIQ decodes the offering for you. Read on.
Offer details – The NCD issue size is divided into base and oversubscription. The base issue size of Rs 500 crore and there is an option to retain oversubscription up to Rs 3,000 crore, aggregating up to Rs 3,500 crore. The face value of NCD is Rs 1,000.
The NCDs have been rated as CARE AAA/Stable and IND Ratings AAA/Stable.
You can put in a minimum application of Rs 10,000 (10 NCDs) collectively across all the options and in multiples of Rs 1,000 (1 NCD) thereafter.
Do remember that mode of trading & allotment is compulsorily in dematerialised form.
The mode of submission of application forms is ASBA only, except small co-operative banks, BOB, Corporation Bank & UCO Bank.
The NCDs will be listed on BSE.
30% of the issue is reserved for retail individuals (category IV) and another 30% is reserved for HNIs (category III).
Coupon rates – There are 4 tenures – 39 months (3 years and 3 months), 60 months (5 years), 96 months (8 years) and 120 months (10 years).
Under the 39 month tenure, HNI and retail investors can get 9.07% effective yield. Under the 60 months tenure, HNI and retail investors can 9.17% effective yield. Under the 96 months, HNI and retail investors can get 9.31% effective yield and under the 120 months HNI and retail investors can get 9.50% effective yield .
Look at the details in the chart below
About the company – MMFSL is a subsidiary of Mahindra & Mahindra. MMFSL mainly finances vehicles of auto makers including Maruti, Hyundai, Nissan and Tata. As of September 30, 2018, MMFSL had total assets (including provisions) of Rs 62,782.30 crore. Its assets under management is spread across auto/utility vehicles (25%), car (21%), tractor (17%), commercial vehicles & construction
equipment (15%), pre owned vehicles (8%), SMEs and others (14% comprising majorly trade SME loans).
As you can understand, MMFSL is crucial to M&M’s sales of rural and semi-urban products like tractors and utility vehicles. It is the largest financier of M&M vehicles financing almost 30% of M&M vehicles.
MMFSL has four main subsidiaries – Mahindra Insurance Brokers Ltd. (80% stake), Mahindra Rural Housing Finance Ltd. (89%), Mahindra Asset Management Company Pvt. Ltd. (100%) and Mahindra Trustee Company Pvt. Ltd. (100%). It also has a US-based joint venture company, Mahindra Finance USA LLC.
Company financials – As per CARE Ratings, the company had a net worth of Rs 9,221 crore and a gross loan portfolio of Rs 83,108 crore as on March 31, 2018 on a consolidated basis.
Take a look at the latest financials:
Company management – MMFSL is headed by Ramesh Iyer as the Managing Director and Dhananjay Mungale is the company’s Chairman (independent director).
Iyer has been associated with the company since inception and is also a member of Group Executive Board of M&M. Mungale is the independent chairman of the company and brings with him vast experience of corporate and investment banking.
Company pros & cons:
1. Strong parent (strength to mobilize funds to meet any liquidity requirements)
2. MMFSL is a strategically important subsidiary for M&M group
3. Long track record of operations and diversified business (started business in 1991)
4. Comfortable capital adequacy ratio post equity infusion during FY18 (total capital adequacy ratio at 22.70%) and liquidity profile
5. Diversified funding profile and portfolio mix
1. Moderate profitability profile with improvement during FY18
2. Asset quality under pressure (Gross NPA ratio of 9.26% and Net NPA ratio of 4.10% as on March 31, 2018
RupeeIQ take – The NCDs come from a reliable and trusted group. The coupon rates offered to retail investors are quite attractive compared to existing fixed income options. These debentures should be used by investors to diversify their fixed income investment portfolio. If you want to apply, do not wait till the end. Often NCD issues are closed earlier when the response is good.
Disclaimer: Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.