9% Muthoot Finance NCD – April’17 – Should you Invest?
Muthoot Finance, the dominant player in Gold Loan Business has come out with public issue of non-convertible debentures (NCD) offering up to 9.00% interest rate. The issue would open on April 11, 2017 and would close on May 10, 2017.
Muthoot Finance NCD – Significant Points:
Offer Period: April 11 to May 10, 2017
Annual Interest Rates for Retail Investors: 8.00% to 9.00% depending on tenure
There is also an option where the money doubles in 8 Years (96 Months) (9.06% annual interest)
Price of each bond: Rs 1,000
Minimum Investment: 10 Bonds (Rs 10,000)
Max Investment Limit for Retail Investor: Rs 10 Lakhs
Credit Rating
Secured: ‘AA (Stable)’ by ICRA and ‘AA/Stable’ by CRISIL
Unsecured: ‘AA (Stable)’ by ICRA and ‘AA/Stable’ by CRISIL
NCD Size: Rs. 1,950 Crores for secured NCD and Rs 50 crore for Unsecured
Allotment: First Come First Serve
Listing: Bonds would be listed on BSE and will entail capital gains tax on exit through secondary market
The fortune of Gold Loan companies are dependent on Gold Prices. Any negative correction to Gold prices can be bad for company
There has been consistent drop in profits of the company and increase in NPAs. If this continues, there might be issues in serving regular interests.
There are NCDs available in secondary market which have higher yields with similar rating. The problem is low liquidity and hence is difficult to buy in large numbers.
The present Tax Free Bonds are offering yields up to 6.5% in secondary market, which is better investment for People in highest tax bracket.
In case you don’t want to do it online, you can download the application form from company site or Financial Institutions and submit to collection centers.
Also note that only option I to VI is also available in Physical Form while option VII to XI would only be available in Demat Form.
Recommendation:
My recommendation is to invest some part of your Fixed Income investment in this NCD Issue
The Option XI (Doubling Money) is riskier than other options as that is unsecure. You should keep away from that option.
You should always have diversified portfolio be it fixed deposit, NCD or equity investment
Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value
If you plan to invest in this issue, do it early as most NCD issues are over-subscribed before the end date.
No related posts.
Amit
Hi Readers! I am Amit, the mind behind Apnaplan.com
I am MBA from NITIE, Mumbai and BIT from Delhi University.
This blog is my online diary where I write about my tryst with my investment decisions. In the 400+ posts on this blog you will find articles on Personal Financial Planning, Investments, Retirement Planning, Insurance, Loans, Fixed Deposits, Provident Funds, Stock Markets, Gold, Silver, Real Estate Investment, Credit Cards, Credit Score, Taxation, Inheritance Planning and Reviews on various Financial Products.
Am deposit money in doubling bond...due to some urgency i need money...can i cancel the double bond?is there any issues to cancel the double bond?
If its in Demat form you can sell it on exchange through your demat account
I am a retired teacher and investing in muthoot finance for the past eight years. You have gradually reduced the rate of interest and thereby making the life of retired personnel difficult.
The NCD rates are linked to market. If the banks reduce interest rate, companies too have to reduce it. I totally agree that life has become difficult for retirees who depend a lot on fixed deposits.
View Comments
Am deposit money in doubling bond...due to some urgency i need money...can i cancel the double bond?is there any issues to cancel the double bond?
If its in Demat form you can sell it on exchange through your demat account
I am a retired teacher and investing in muthoot finance for the past eight years. You have gradually reduced the rate of interest and thereby making the life of retired personnel difficult.
The NCD rates are linked to market. If the banks reduce interest rate, companies too have to reduce it. I totally agree that life has become difficult for retirees who depend a lot on fixed deposits.