Muthoot Finance – India largest gold loan company has once again come out with NCD (non-convertible debentures) offering 13 – 13.25% interest in 2, 3 and 5 years tenors. It also has a product which doubles your money in 66 months offering a pre-tax yield of 13.46 per cent.
Salient Features: Muthoot Finance NCD
- These NCDs are available only in dematerialized form and can be bought individually or jointly
- The NCDs are available for four maturity periods – two years, three years, five years and five-and-a-half years
- The interest would be paid annually, except for NCDs with a maturity of five-and-a- half years for which the payment option is cumulative
- This NCD would be listed on BSE only
- The NCD issue doesn’t have the call or put options
- A unique feature is that you will get a 13% interest on the re- funded application money
- Minimum Investment: Rs 5,000
- Issue Opens on March 2, 2012
- Issue closes on
March 17, 2012April 9, 2012 (Date has been extended)
Interest Rate and post tax return Details: Muthoot Finance NCD
|Annual Interest Payout||Cumulative Scheme|
|Interest Rate||13.00%||13.25%||13.25%||13.43% (Annual Yield)|
|Post Tax Return|
|10.3% Tax Bracket||11.66%||11.89%||11.89%||12.05%|
|20.6% Tax Bracket||10.32%||10.52%||10.52%||10.66%|
|30.9% Tax Bracket||8.98%||9.16%||9.16%||9.28%|
Muthoot NCDs have been rated AA-(stable) by ICRA Ltd and AA-/stable by Crisil Ltd. The ratings indicate very low credit risk as well as a high probability of timely interest payment.
Company Details: Muthoot Finance
Muthoot Finance is on a strong growth path and its profit after tax in the first six months of the current fiscal year stood at `406 crore compared with a profit of `494 crore during the whole of FY11. The capital adequacy ratio of the company stands at 18.24%, much above the regulatory requirement of 15%.
However, the increasing level of non-performing asset (NPAs) is a problem area. The gross NPAs of the company were 0.59% in the first six months of FY12, up from 0.29% in entire FY11. While all its loans are securitized, a substantial correction in gold pric- es may adversely affect the loan recovery process, which in turn will hit the company’s financials.
Should you invest in Muthoot Finance NCD?
We recommend investing in the present Muthoot Finance NCD as this offers high interest rates for the risk it carries. One thing to keep in mind is you might need to hold the bonds till maturity due to low liquidity of the same on stock exchanges. The other risk as stated by many analysts are in recent past Gold prices have become very volatile and if the prices of Gold crash in near term, Muthoot Finance may face difficulty in paying such high rates of interest.
Mint Recommendation: At 13%, the two-year option is attractively priced; a short lock-in reduces the perceived risk of holding for a long time.