Non-banking financial company Muthoot FinCorp Limited today, September 4, 2023, announced plans to raise Rs 400 crores by issuing non-convertible debentures (NCDs). The public issuance of NCDs will end on September 14. It may close early if its Board approves it.
The first tranche of the NCDs, secured and redeemable with a face value of Rs 1,000, is valued at Rs 100 crore, with a green shoe option of Rs 300 crore, aggregating up to Rs 400 crore. The issue is open to the public till September 14, 2023, Muthoot said in a release.
Investors have 10 NCD options with varying tenures and interest payouts to choose from. These debt instruments typically offer yields from 8.65 per cent to 9.43 per cent.
The NCDs are available for 24 months, 36 months, 60 months, and 96 months with monthly, annual, and cumulative payment options.
The highest annual coupon rate of 9.44 per cent is offered on ‘Option VI’ 60-month term NCDs with yearly payments. It provides an effective yield of 9.43 per cent, Muthoot Fincorp said.
For ‘Option III’ 60-month term NCDs with monthly coupon payments, investors can secure a yearly coupon rate of 9.05 per cent, with an effective yield of 9.43 per cent.
NCDs are debt instruments secured against the company’s assets and are issued to raise funds from investors for a specific purpose. Muthoot Fincorp said it will allocate the funds raised for onward lending, financing, repayment/prepayment of interest and principal of the company’s existing borrowings and for general corporate purposes.
NCDs don’t provide any option of conversion to equity, but they are listed securities. So, an investor can sell them in the secondary market before maturity.
Though NCDs offer higher interest rates than bank fixed deposits, they come with certain risks. Credit rating agency CRISIL has assigned an “AA-/ Stable” rating to the NCDs. Though this rating falls short of CRISIL AAA, Crisil says that instruments with this rating are considered to have a high degree of safety regarding the timely servicing of financial obligations.
