Wednesday, August 17, 2011

Mannapuram Finance NCD: Analysis, Review, Recommendation

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Mannapuram, a company dealing in gold loans, is coming out with a secured non convertible debenture (NCD) issue of face-value of Rs 1,000 each, aggregating to Rs 400 crore, with an option to retain over-subscription up to Rs 350 crore, aggregating a total of Rs 750 crore. The company deals primarily in South India as 86% of their loans are made in Andhra Pradesh, Karnataka, Tamil Nadu and Kerala.

The issue opens on August 18 and closes on September 5, with the company having the option to close the issue earlier. The issue is planned on a first-come, first-serve basis. The NCDs have a face value of Rs 1,000 and one can apply for a minimum of Rs 5,000.

There are two options offered by the Mannapuram NCD:
Option I: The maturity date is 400 days from the deemed date of allotment and the maturity amount per bond is Rs 1,132.25 for bondholders in all categories. The yield to maturity is 12% per annum.

Option II: The maturity date is 24 months from the deemed date of allotment. The interest rate is 12% per annum for non-institutional investors, while, for retail investors, it is 12.2%.

For both options, the interest payment is semi-annual and the face-value plus any interest that may have accrued is payable on redemption. There is no put/call option in any of the options. The interest payable would be taxable, though there is no tax deduction at source. The NCDs would be planned to be listed on the BSE.

The gold loan business, and rising gold prices have been a boon for Mannapuram as the company's revenues have increased rapidly in the past few years driven by that business. On March 31st 2011 the company's portfolio of gold loans stood at Rs. 63,705.41 million, which rose from Rs. 18,512.26 million the year before, and was Rs. 4,000.63 million in the year before that.

Click here to check Mannapuram NCD Allotment status!

Manappuram NCD listed on 16th September, 2001 at a discount. The 2 year series went as low as Rs. 950 before closing at Rs. 973. This shows that one can get even better yield if one buys from the secondary market. Strange as the 12.2% interest rate was quite attractive but if one purchases this from the secondary market now, one can get even higher rate of return.
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