10.8% Muthoot Finance NCD – March/April 2015 – Should you Invest?

Muthoot Finance NCD – March-April 2015 – Should you Invest
Muthoot Finance NCD – Mar/April 2015 – 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 10.80% interest rate. The issue opens today and closes on April 27, 2015.

Muthoot Finance NCD – Significant Points:

  • Offer Period: March 25 – April 27, 2015
  • Annual Interest Rates for Retail Investors: 9.75% to 10.80% depending on tenure
  • There is also an option where the money doubles in 6 Years 9 Months (10.80% 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: ‘ICRA AA-/Stable’ by ICRA
  • 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

Muthoot Finance NCD – Investment Options:

There are 11 options of investment in Muthoot Finance NCD.

Muthoot Finance NCD – Investment Options - March-April 2015
Muthoot Finance NCD – Investment Options – March/April 2015

The first 10 options are secured while the last option which doubles the money in 6 Years 9 Months is unsecured.

Muthoot Finance NCD – Who can Apply?

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

  1. Category I – Institutional Investors – 5% of the issue is reserved
  2. Category II – Non-Institutional Investors, Corporates – 5% of the issue is reserved
  3. Category III – Retail Individual Investors including HUFs – 90% 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. Largest Gold Loan player in India
  3. The interest rates are better than your regular FDs

Why you should not invest?

  1. The fortune of Gold Loan companies are dependent on Gold Prices. Any negative correction to Gold prices can be bad for company
  2. 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.
  3. There are other competing NCDs with similar interest rates

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.

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:

  1. My recommendation is to invest some part of your Fixed Income investment in this NCD Issue
  2. The Option XI (Doubling Money) is riskier than other options as that is unsecure. You should keep away from that option.
  3. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
  4. 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 good NCD issues are over-subscribed before the end date.

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6 thoughts on “10.8% Muthoot Finance NCD – March/April 2015 – Should you Invest?”

  1. i have some money for fixed deposit i need monthly10000RS how much money need for that pls give me details

    1. Assuming interest rate of 7.5% per annum, you would need approximately 16 lakhs to get Rs 10,000 interest monthly (pre tax).

  2. I would like to fixed deposit on your best scheme, which is better , please send me the details.I am working in Saudi Arabia Now.

  3. I am a NRI. I have some money for fixed dipposit. I need monthly income above 20000 Rs. Which is the best scheme of your bank. How much amount need for that. Please give me details. Thank you.

    1. Assuming 7.5% interest on fixed deposit you would need Rs 32 lakhs deposit. You can compare the highest fixed deposit offers by banks here and best company fixed deposits here. YOu can also look for tax free bonds from secondary markets but the interest paid would be annually.

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