15-Feb-2021
Muthoot FinCorp Limited launched its seventh NCD (non-convertible debentures) issue on 28 September. The issue size is Rs 200 crore with a greenshoe option of another Rs 200 crore, a total of Rs 400 crore. The offer closes on 23 October.
Companies use non-convertible debentures to raise long-term capital for their business. In simple words, it is like a loan that the company borrows from the public which it will return with interest. These come with a fixed interest rate and tenure. It is like a fixed deposit with a bank in a way, but less secure.
Companies give the option to convert debentures issued into shares after a certain time to the owners of these debentures. NCDs do not come with this option. Further, these are divided as secured and unsecured NCDs. Secured NCDs are backed by the company’s assets and unsecured ones are not. The unsecured ones are paid a higher interest rate because they hold higher risk.
The offer is rated as “CRISIL/A” Stable by CRISIL.
Invest with caution as the “A” rating from CRISIL is lower than “AA” or “AAA”. There is high risk associated with such a rating.
Muthoot FinCorp is part of the Muthoot Pachappan Group and should not be confused with Muthoot Finance, which is part of a separate corporate group and also a listed company. Thomas John Muthoot, Thomas George Muthoot and Thomas Muthoot are the promoters of Muthoot FinCorp. Returns from NCDs are taxed based on one’s income tax slab.
The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.
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