Muthoot Finance NCD Extended
DSIJ Intelligence / 08 Oct 2012
The issue from Muthoot Finance had tapped the market last month to raise funds of up to Rs 500 crore by issuing Non-Convertible Debentures (NCDs) which was expected to close on Friday i.e. October 5, 2012. However, till the closing date, the issue was subscribed merely 0.41 times. This resulted in the company, in consultation with the lead managers, to extend the issue period up to October 22, 2012. One should note that other NCDs (India Infoline, Shriram City, Religare Finvest) which had tapped the market last month received a good response from the investors as their issues were fully subscribed.
The issue is still ongoing and the company is offering five options for the investors. One should further note that the minimum application for both the issues is of Rs 10,000 (10 NCDs with face value of Rs 1,000). Thereafter the application can be made in multiples of Rs 1,000 or one NCD. Both the NCDs will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The following is the issue information table which shows the horizon and the rate of interest available under various options for retail individuals:
| Muthoot Finance | |||||
| Options | I | II | III | IV | V |
| Tenure | 24 Months | 36 Months | 60 Months | 72 Months | |
| Frequency of Interest Payment | Annual | Annual | Monthly | Annual | Cumulative |
| Minimum Application (Rs) | 10,000 | ||||
| Effective Rate (%) Per Annum | 11.5 | 11.75 | 12.4 | 12.00 | 12.25 |
| Redemption Amount (Rs / NCD)* | NA | NA | NA | NA | 20,000 |
| *Assuming minimum amount is invested | |||||
The company is not receiving a good response from the investors because the risk associated with Muthoot Finance is that of high volatility in the gold prices and the government’s norms which is affecting the business outlook for the company. Further, the NPA of the company is also showing a rising trend, which is not a good sign. We at Dalal Street Investment Journal believe that given the attractive yield one could park a small portion of the portfolio to be able to diversify the risk. Therefore, invest with a very limited exposure.
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