Muthoot Finance is coming up with Tranche IV secured NCD bonds now. These bonds would open for subscription on 28th November, 2022. Muthoot Finance is the largest gold loan business company in India. The NCD interest rates for Muthoot Finance NCD are up to 7.75%. These NCDs are offered for 36 months to 60 month tenure. Interest is paid either monthly, yearly or on maturity. Should you invest in Muthoot Finance NCD issue of November, 2022? What are the risk factors one should consider before investing in Muthoot Finance Tranche IV NCD’s of 2022?
About Muthoot Finance Limited
Muthoot Finance Limited is the flagship company of the Kerala-based business house, The Muthoot Group, which has diversified operations in financial services, healthcare, education and hospitality.
The company derives a major portion of its business from South India (50% of the total gold loan portfolio), where gold loans have traditionally been accepted as a means of availing short-term credit, although it has increased its presence beyond South India over the last few years.
Muthoot Finance NCD issue – Nov-2022
Here are the issue details.
| Opening Date | 28-Nov-22 |
| Closure date | 19-Dec-22 |
| Security Type | Secured, Redeemable and Converted NCDs |
| Issue Size (Base) | Rs 75 Crores |
| Issue Size (Oversubscription) | Rs 225 Crores |
| Total Issue Size | Rs 300 Crores |
| Issue price | Rs 1,000 per bond |
| Face value | Rs 1,000 per bond |
| Minimum Lot size | 10 bonds and 1 bond there after |
| Tenure | 36 to 60 months |
| Interest Payment frequency | Monthly, Yearly and on Maturity |
| Listing on | Within 6 working days on BSE/NSE |
Muthoot Finance NCD Interest Rates – Nov-2022 Issue
| Series | I | II | III | IV | V | VI | VII |
|---|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Monthly | Monthly | Annual | Annual | Annual | Cumulative | Cumulative |
| Tenor in months | 36 | 60 | 24 | 36 | 60 | 36 | 60 |
| Coupon Rate (Retail) | 7.85% | 8.00% | 7.75% | 8.10% | 8.25% | NA | NA |
| Effective Yield (% per Annum) | 7.85% | 8.00% | 7.75% | 8.10% | 8.25% | 8.10% | 8.25% |
| Amount on Maturity (Rs) | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | 1,263 | 486 |
What are the credit ratings for these NCDs?
Muthoot Finance NCD rating is assigned as AA+ (Stable) by ICRA. Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
Muthoot Finance NCD interest payment date
Interest payment date for Muthoot Finance NCD would be the first day of the subsequent month / year (from the date of allotment of NCDs) in case of monthly and yearly payment options. In case of cumulative option, such NCD interest would be paid on the maturity date.
How is the company doing in terms of profits?
Its consolidated profits are as below:
FY2020 – Rs 3,169 Crores
FY2021 – Rs 3,819 Crores
FY2022 – Rs 4,031 Crores
Why to invest in these NCDs?
1) Muthoot Finance NCDs offer attractive interest rates where investors can get interest up to 8.25% per annum.
2) Muthoot Finance generates consistent margins. This means that company has ability to pay interest payment on time to its NCD holders without any delay.
3) It issues secured NCDs. Its secured NCDs are safe compared to unsecured NCDs. In case a company gets wind-up/shut down for some reason, secured NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence it is safe to invest in such secured NCD options.
Why not to invest in these NCDs?
1) The Spread of COVID-19 pandemic and the consequent nationwide lockdowns and covid restrictions have impact on its operations and financial condition. Any covid related restrictions or lockdowns in the future would have an impact on company business.
2) Its financial performance is particularly vulnerable to interest rate risk. If they fail to adequately manage interest rate risk in the future it could have an adverse effect on its net interest margin, thereby adversely affecting its business and financial condition.
3) Refer NCD prospectus for complete risk factors.
How to invest in Muthoot Finance NCD Online?
This issue is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. Application forms can be downloaded on the lead manager web site. For more information on this you can refer prospectus.
How safe is Muthoot Finance NCD?
These NCD bonds are rated as AA+ by ICRA. Such credit rating carry low credit risk.
Should you invest in Muthoot Finance NCD?
Muthoot Finance NCD of Nov-2022 issue offers high interest rates. These NCDs are rated as AA+ by ICRA, which are considered as good (while AAA rated bonds could have been better). However, these credit ratings can change in future without any advance intimation. Since these are secured NCDs, these are a little safer. Currently larger bank FDs (except for small finance banks) and debt funds are providing very low returns. High risk investors can invest in these NCDs for short term to medium term.
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Dear Suresh Sir, there is a mention of 0.5% incentive in this NCD. Could you kindly elaborate on who it is applicable for and under what circumstances? Thank you so much as always for the detailed analysis. I visit your site everyday and learn.
Warm Regards,
–anand
Anand, The interest rate is divided for non retail investors and retail investors. For retail investors, there is 0.5% higher interest rate compared to regular investors.
For retail investors, there is 0.5% higher interest rate . Whether this applicable to
Muthoot Finance NCD – Nov-2022 Issue
Rajesh, For retail investors NBFCs majorly offer 0.5% higher interest rates. The rates indicated in our article is for retail investors.
Hi Sir ,
Please create a post for us for best/high rate small finance bank and other bank , as the intertest rate is good now . it will help the your followers to save there money from NBFC default . At least they will get Deposit insurance as the word “Guarantee” comes into picture 🙂
Thanks
Prem
Sure Prem
Muthoot Finance having a rating of AA+(stable) offering an interest rate of 8% (monthly payment) for 60 months, whereas Credit Access Grameen Bank having a rating of AA-(Stable) offered an interest rate of 10% (monthly payment) for 60 months.
It is really becoming unfathomable and intriguing as to why only a suffix change from ‘+’ to ‘-‘ would entail a difference of whopping 2% or more than 20% differential in interest rate.
Kamal, like I indicated earlier, Creditaccess grameen came for NCD first time. Just see what happens in their next NCD. My view is that they should reduce the rates. Yes even it puzzles me that companies having similar credit rating, but huge difference in interest rates.
Hi Suresh,
Currently many small finance banks are giving FD interest rate more than 8% per yr and up to 5 lac FD amount is insured/guaranteed by DICGC(RBI) in case of bank default, Therefore it is not worthy to invest in this NCD, instead small finance banks are more safer. what is your opinion?
Small finance bank FDs are secured under DICGC up to Rs 5 lacs. Yes, I agree, but the trust is still low. If you can take some risk, you can still invest.
Not understood risk part here sir, coud u pls help to explain, As per DICGC, in case of default of a any bank, FD ammount insured upto 5 lac will return in within 6 month of default of bank. Isn’t small finance banks are much more safer than NCD, as already we have seen in case of DHFL future group etc most of investors lost there money. However currently some of small bank giving interest rate 9% for senior ctz.
Yes, Small finance banks are covered under DICGC up to Rs 5 lacs. Its like investing in small finance bank which is less known Vs investing in NCDs of large companies with high credit rating. In my personal opinion people prefer second option.
I agree with Mr.Klesh, here the point is, the small fin. bank are covered under DICGC, and governed by RBI. So the factor, ‘less known ‘ is not important. I my opinion, investment SFB seems less riskier than NCD if the interest rate are par and the investement amount is within DICGC limit per investor per SFB.
It is not true that Bank FDs currently offer lower rates of interest.As against 60 months tenor of Muthoot at 8.25%,Bank of India’s 777 days FDR offers 7.75% for Senior Citizens.It is highly liquid.It also offers monthly interest.Much less risky being a PSU Bank.
Advisable to invest in BOI’s 777 day Fixed Deposit!
However you have very well explained the risk factors.
Hello Ramakrishna, I was topper in telugu subject till 10th, however just above 60% in other subjects. Can I be still called as topper? Same way, one or two banks is offering high interest for 777 days and can we say interest rates are high? Many large banks are still offering lower interest rates for 1 to 5 years tenure which are between 6% to 6.5%. The rate you quoted is for Sr. citizens, but what about others. Yes I agree that small finance banks and few banks like what you indicated + Canara bank are offering high rates for specific tenure. My comment is for overall and not specific to couple of banks or couple of tenures.