Muthoot Finance Jan 2017 NCD Public Issue : Details & Review

The interest rates on Bank fixed deposits have been on the downward slope and the interest rates on popular small savings schemes like Senior Citizen Savings Scheme, Post office MIS etc., are not very attractive. Also, Tax Free Bond Issues are not available now. This is inducing many small investors to look out for better fixed income products which can give decent fixed rate of return.

NCDs or Non Convertible Debentures are one of the fixed income options that can satiate investors’ hunger for better yield.

Almost all the recent and latest NCD Public Issues have been fully subscribed from all category of investors on day one of the subscription period itself.

The latest NCD issue by  SREI Equipment Finance (Jan 2016) has been fully subscribed within four days from the date of issue opening i.e. January 03, 2017.

Many companies like Mahindra & Mahindra Fin Services, Edelweiss, Dewan Housing Finance, India Bulls Housing Finance etc., have raised funds by issuing NCDs in FY 2016-17.

Adding to the list is Muthoot Finance Ltd’s lastest NCD offering. Muthoot Fin is now proposing to issue secured & un-secured redeemable NCDs. The proposed public issue will be open for subscription from 17th January, 2017 to 17th February, 2017.

What is a Debenture?

Debenture is a type of Debt instrument which offers a fixed rate of interest for a specified tenure. Companies or governments use debentures to borrow money. Debentures are simply loans taken by the companies and do not provide the ownership in the company.

What are NCDs?

Debentures are of two types; Convertible and Non-Convertible. The convertible debentures are the ones that can be converted into equity shares at a later time. This convertibility provides attraction to the investor but yield lower interest rates. Non convertible debentures does not convert into equity shares thus can yield a higher interest rate.

An NCD can be Secured or Unsecured. Secured NCDs are backed by the issuer company’s assets to fulfill the debt obligation unlike unsecured NCDs.

Muthoot Finance’s latest NCD issue offers non-convertible debentures in the form of both Secured & non-Secured NCDs.

Muthoot Finance Jan 2017 NCD : Issue Details & Features

Muthoot Finance is the largest Gold Loan non-banking finance company in India. Below are the few important details about Muthoot Finance’s Jan 2017 NCD Issue;

  • NCD Issue opening Date : 17th January, 2017
  • Issue Closes on : 17th February, 2017.
  • Interest Rate or Coupon Rate on NCDs : The ROI ranges from 8 % to 9.25% depending on the category of investor and tenure of the NCDs.
  • Issue Size: Base Issue size is Rs 200 cr (with an Option to retain over-subscription amount up to Rs 1,400 Crores, out of which up to Rs 1,300 cr is allocated for Secured NCDs and Rs 100 cr for un-secured NCDs. )
  • Mode of Issue : Physical & Demat forms, subject to certain conditions.
  • Face Value or Issue Price of one NCD is Rs 1,000.
  • Available Tenor options : 18 months to 60 months.
  • Frequency of Interest payment : Monthly, Annual & Cumulative (on maturity date of NCDs).
  • Minimum Application size : Rs 10,000 (10 NCDs) and in multiple of Rs 1,000 thereafter.
  • Listing : The NCDs are proposed to be listed on BSE stock exchange.
  • Security & Asset Cover : The Company and Promoter will create and maintain appropriate security in favour of the Debenture Trustee for the NCD Holders on the assets adequate to ensure required asset cover for the Secured NCDs.
  • Credit Ratings : Credit Rating of ‘AA (Stable)’ by ICRA and ‘AA/Stable’ by CRISIL for Secured NCDs for an amount of Rs. 1,300 Crores and Credit Rating of ‘AA (Stable)’ by ICRA and ‘AA/Stable’ by CRISIL for Unsecured NCDs for an amount of Rs. 100 Crores.
  • Issue Allocation Ratio : 70% of the issue is for retail & HNI individual investors  (HNIs – individuals (applying for an amount of > Rs 10 lakh).
  • There are no PUT & Call options for these NCDs. (What are Put & Call options? – NCDs can have Put or Call options. If a company issues a ‘Callable Debenture’, it means that it can be redeemed by the Issuer (company) before the bond’s maturity. A debenture with a ‘Put option’ works in exactly the opposite manner, wherein the investor can sell the bond to the issuer at a specified price before its maturity.)
  • Allotment of NCDs is on ‘first come, first served’ basis.
  • NRIs are not eligible to apply to this NCD issue.

Rate of Interest on Muthoot Finance Jan to Feb 2017 NCD Issue

Rate of interest coupon rate interest rate on Muthoot Finance Jan 2017 ncd debentures bonds jan to be 2017

Should you invest in Muthoot Finance NCD Issue (Jan 2017)?

We all are aware that interest rates on fixed income securities are moving downwards. Also, if you observe the interest rates offered in the last two NCD issue (by Reliance HFL / SREI EFL) were better than the ROI offered in this issue. Considering this downtrend, if you are looking for regular interest income and are in 10% or 20% income tax slab rate, you may consider investing in 2 year / 3 year period Secured NCDs.

If you require regular income, can subscribe to monthly or annual interest payment mode. If you do not require regular income, you may subscribe to cumulative option. However, tt is advisable to avoid investing in un-secured NCDs.

Before investing in NCDs, kindly calculate your post tax returns on debentures and take your decision, as the interest payouts are taxable.

Post-tax returns = Pre-Tax returns * { (100-Tax Rate) / 100 }

Are NCDs totally risk-free? – No, they are not risk-free. These carry higher risk than bank deposits. The main risk with NCDs is default risk. The issuer may not be able pay the interest payments.

NCDs are relatively safer assets than Stocks and mutual funds but they are riskier than bank FDs and Government bonds. NCD Issuers normally do not default but when things go drastically wrong, they may face problem in paying the investors.

Kindly keep in mind all the above points when investing in NCDs. Also, do not invest your entire savings or investible surplus in one NCD issue alone.

Have you invested in any of the recent Public Issues of NCDs? Do you prefer NCDs to Bank FDs? Kindly share your views and comments.


    Dear Sir,
    There is a term called series 1-11, What is the series in this NCD. what does it mean?? and its told as a secured and Unsecured Redeemable Non-Convertible Debentures. This is confusing??

  • t.umarani says:

    i would like to muthoot ncd for 3 years for 30000 is it good return how to buy debentures

  • Amiya Jena says:

    Dear Sreekant,
    Very good description, given by you. It is clear and simple words used to easy understanding.
    I am planning to buy Muthoot Fincorp, Cumulative for 3 years. Is it ok.
    If I compare yearly pay out, it will be good or cumulative will be good. I can spare my money for 3 years.

    Thanks you in advance,


  • Devadoss Eswar says:

    Very nice summary , Sreekanth !

  • Anil says:

    Hi, Whether NRO can apply in NCD ?

  • VIPUL PAREKH says:

    Hi, Just want to know will there be any TDS at source ……

    • Dear Vipul,
      TDS is not applicable on the listed debentures’ interest payouts (which are in Demat form). Else, TDS will be applicable if the interest exceeds the threshold limit of Rs.5,000/- in a financial year.
      However, kindly note that interest earned on NCD bonds is taxable as per the tax slab of the investor.

  • Siddharth says:

    The Muthoot issue is compulsoriy in Demat, whereas you have mentioned both Demat and Physical, please correct the same

  • jagadeesh says:

    For Demat account call 9908166697

  • Sanjay says:

    Dear Sree, how can I invest in above secured NCD in Kolkata? I don’t have any demat account.
    BTW, I want to open a demat & trading account which is is easy to maintain, VFM and cost effective. I’m confused between Angel and Zerodha. I prefer a platform which is easy and helps me create a portfolio and maintain it, and gives me suggestions on choosing best stocks time to time. Since I’m new to stock markets, I do invest in MFs based on your posts via MFU portal. And may I ask which platform you personally use?

    • Dear Sanjay,
      Are you planning for long-term investments in Stocks?
      I use Fundsindia platform and direct fund house websites for my MF investments. I also have ICICIDirect account but rarely using these days.
      You can invest in NCDs through demat account (or) have to submit application forms offline at the authorized financial institutions (for this scheme, Edelweiss, AK capital, etc)

      • Sanjay says:

        I’m investing first time in bonds. How the process is like?

        Dear Sree, yes my planning is long term investment in stocks. My primary object is (as of now, due to limited knowledge) to buy company equity shares when price is down, hold it, when price increases, sell them.

        So, I want to open a demat & trading account which is is easy to maintain, VFM and cost effective. I’m confused between Angel and Zerodha. I prefer a platform which is easy and helps me create a portfolio and maintain it, and gives me suggestions on choosing best stocks time to time. Since I’m new to stock markets, I do invest in MFs based on your posts via MFU portal.

        I wish if you could write a series of article (or make videos) on basics of stock market for new investors.

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