Tuesday, December 27, 2011

Muthoot Finance NCD Issue

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Muthoot Finance has come out with an issue of secured non-convertible debentures (NCDs) of Rs 3000 million size with a face value of Rs 1000. This is the second issue after Muthoot finance came out with successful issue few months back.

This issue is open on from December 22, 2011 and will close on January 7, 2012. The minimum investment required is Rs 5000.

The issue offers 4 options:
1. 24 months: 13% annual interest payment
2. 36 months: 13.25% annual interest payment
3. 60 months: 13.25% annual interest payment
4. 66 months: 13.43% effective interest rate with cumulative interest

Muthoot Finance NCD issue has got AA-/Stable rating by CRISIL and AA-/Stable rating by CARE. The issue will be listed in BSE with the depositories being CDSL and NSDL. DMAT account is a must to buy this issue and hold it.

The lead managers of this issue are ICICI Securities Limited, AK Capital Services Limited, HDFC Bank Limited, and Karvy Investor Services Limited.

Investors can actually double their investment in just 5 and 1/2 years with this NCD. Muthoot Finance has made consistent profits, and this is a secured NCD issue which means that certain assets of the company will be attached to the NCD in case of default. However, this doesn’t mean guarantee of any kind, and if it comes to a default then investors might get less than the face value of the bonds. We would advice investors to keep a balanced portfolio with assets in different instruments even in fixed income asset class.
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