The NCD issue, with 3 investment options and an effective yield of up to 12.25% per year closes on September 5 with an option of early closure.
The face value of each NCD is Rs. 1,000 and the minimum application is for 5 NCDs (Rs. 5,000) and in multiples of one thereafter. The NCDs would be listed on the National Stock Exchange and the Bombay Stock Exchange.
The issue has been rated AA-/stable by Crisil and AA- (stable) by ICRA for an amount of up to Rs. 1,000 crore. There are three investment options in the issue.
The company said,'' The funds raised through the issue would be utilised for various financing activities including lending and investments, to repay existing liabilities or loans and towards business operations including for capital expenditure and working capital requirements".
The Muthoot Finance's gold loan portfolio as of March 31, 2011, consisted of 47 lakh loan accounts, serviced through 2,733 branches across 20 states in India. It has since increased its branch network to 2,997 branches and employs 19,125 persons in its operations.
The lead managers to the issue are ICICI Securities, HDFC Bank, JM Financial Consultants, Kotak Mahindra Capital Company and YES Bank. The co-lead managers to the issue are Karvy Investor Services and RR Investors Capital Services.
What is NCD?
NCD is a kind of debenture issued by the company. The specialty of these debentures is non convertible to stock. It carries comparatively higher interests than convertible debentures. Usually NCDs gives an interest rate of 11 - 12 %. Retail investors will invest these debentures in a crashing stock market. The RBI (Reserve Bank of India) has increased the key interest rates 11 times from March 2010. The particular situation is very positive for issue NCDs.
Stock market crashes when the interest rates are increased. RBI has increased the key rates. So it is the right time for issue NCDs.
India is the worst performing market in 2011. Sensex and Nifty has lost 10% in this year. Stock market uncertainties will lead investors to NCDs and Gold. NCDs have many advantages than Gold. NCD ensures fixed interest, but gold cannot guarantee any fixed return. So the investment in Gold is risky than NCDs. It is a positive thing for NCDs. NBFC (Non Banking Financial Companies) are very active to issue NCDs to investors.
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