Muthoot Finance to raise Rs 1,000 crore through NCDs

This is Muthoot's 21st public issue series of secured redeemable NCDs. The offer has a base issue size of Rs 100 crore with an option to retain oversubscription up to Rs 900 crore, aggregating up to the tranche limit of Rs 1,000 crore.

Kochi:Non-banking finance company (NBFC) Muthoot Finance will raise Rs 1,000 crore through non-convertible debentures (NCDs) for the purpose of lending, the firm announced on Thursday.

This is Muthoot's 21st public issue series of secured redeemable NCDs. The offer has a base issue size of Rs 100 crore with an option to retain oversubscription up to Rs 900 crore, aggregating up to the tranche limit of Rs 1,000 crore ("Tranche III issue").

The issue opens on September 27, 2019, and closes on October 25, 2019, with an option to close on such earlier date or an extended date as may be decided by the board of directors or NCD committee.

Muthoot Finance Managing Director George Alexander Muthoot said: "The issue will help the company have long-term funds and diversify its borrowing basket as well. The previous NCD issues were well received in the market and were over-subscribed."

"It provides an opportunity to Retail and High Networth Individual investors, to whom we have allocated 80 per cent of the total issue size, with stable and attractive long-term returns when there are only limited comparable alternative avenues for investments," he added.

The issue is rated by two Credit Rating Agencies - Crisil and Icra. Both agencies have awarded a long-term debt rating of ‘AA/Stable' for the debentures offered under the issue. The rating scale denotes ‘High degree of safety regarding timely servicing of financial obligations and very low credit risk'.

The NCDs are proposed to be listed on the BSE. The allotment is based on first come first serve basis.

The Muthoot stock was trading higher at Rs 675.70 a share, up to Rs 6.55, or by 0.98 per cent, on the BSE at 1.15 p.m.

There are ten investment options for Secured NCDs with ‘monthly' or ‘annual' interest payment frequency, or ‘on maturity redemption' payments with effective yield per annum ranging from 9.2 per cent to 10.00 per cent.

The funds raised through this issue will be utilised primarily for lending activities of the company, it said.

This should come as a relief to the sector as a whole that is showing small signs of recovery as cash-strapped NBFCs raise funds through NCDs to fund retail loans. With NBFCs defaulting on payments, banks and other fund houses were wary of subscribing to their debt papers. NBFCs too were shying away from floating papers.

While the government has recently opened a number of avenues for NBFCs for meeting their credit needs, it may be a while before they have the ease of raising funds from banks and mutual funds.

NBFCs, typically, raise funds either from banks or mutual funds. Banks generally finance up to 60 per cent of NBFC fund needs while about 30-35 per cent comes from fixed income mutual funds.

IL&FS, DHFL and Altico have been among defaulters on interest payments to their financier banks.