12.25% Muthoottu Mini Financiers NCD – July/Aug 2015 – Should you Invest?

Muthoottu Mini Financiers Limited, is NBFC based out of Kerala dealing in Gold Loans. It has main presence in southern states with some branches in Delhi, Haryana etc. This is different from Muthoot Finance, (different spelling and logo) which is the biggest player in Gold Loan.

Muthoottu Mini has come out with public issue of non-convertible debentures (NCD) offering up to 12.25% interest rate.

The issue opens today and closes on August 14, 2015.

Muthoottu Mini Financiers NCD – Significant Points:

• Offer Period: July 16 – August 14, 2015
• Annual Interest Rates for Retail Investors: 11% to 12.25% depending on tenure
• There is also an option where the money doubles in 72 Months (12.25% annual interest)
• Additional 0.25% interest for Senior Citizens, ex-servicemen and existing NCD holders
• 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: ‘BBB-’ [Triple B Minus] by CARE
• Allotment: First Come First Serve
• Listing: Bonds would be listed on BSE and will entail capital gains tax on exit through secondary market

Also Read – Know NCD – Investment Tips, TDS and Taxation

Muthoottu Mini Financiers NCD – Investment Options:

There are 7 options of investment in Muthoottu Mini NCD.

Muthoottu Mini Financiers NCD – Who can Apply?

This issue is open to all Indian residents, HUFs and Institutions.

1. Category I – Institutional Investors – 10% of the issue is reserved
2. Category II – Non-Institutional Investors, Corporates – 30% of the issue is reserved
3. Category III – Retail Individual Investors including HUFs – 60% of the issue is reserved

However NRIs cannot apply for this NCD.

Why you should invest?

1. The NCD is secured, which means the above debt is backed by assets of the company
2. The interest rates are better than your regular FDs
3. Low NPA and consistently high profit over the years

Why you should not invest?

1. The credit rating is BBB- which might come down in case there is further fall in Gold Prices and increase in NPA
2. The fortune of Gold Loan companies are dependent on Gold Prices. Any negative correction to Gold prices can be bad for company
3. RBI had issued show cause notice to the company for alleged violation of RBI directives. In case RBI takes action the business might suffer

How to Apply?

If you have Demat account apply through that. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work
In case you don’t have Demat Account, you can download the application form from company site or Financial Institutions and submit to collection centers.

Recommendation:

1. My recommendation is only HIGH risk takers should invest some part of your Fixed Income investment in this NCD Issue
2. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
3. Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value