Tuesday, January 7, 2014

Manappuram's NCD Offering 12.61% to Close on or Before January 20th

The ongoing Non Convertible Debenture (NCD) Issue of Manappuram Finance Ltd will normally close on Monday, January 20th. But the Company and its underwriter has retained the option for an early closure, which means there might be only a few days left to subscribe to this NCD Issue.

ICICI Securities is the underwriter for this Issue.

Unlike many other comparable gold loan companies as well as NBFCs in other sectors, Manappuram has been very cautious in going for public issue of NCDs. This is only the second-ever NCD offer from this gold loan major. The first offer happened around two years back, before the gold loan sector started witnessing tremendous changes, both on the regulatory front and the gold price front.

It is commendable that Manappuram prudently waited out for two years for coming out with their next NCD issue. Because, both gold prices as well as regulatory changes have stabilized during the past few months.

Manappuram’s current NCD Issue size also comes across as prudent, because despite having a CRISIL rating of A+ for Rs. 300 crore of  NCDs, Manappuram is trying to take in only Rs. 100 crore. It retains the option to take in an additional Rs. 100 crore through the green shoe option if the demand is beyond their current expectations.

The effective annual yield or interest of the current offer is very attractive at 12.61%, and is industry-leading. Coming from a stable business like Manappuram it is likely to get good investor support much before the tentative deadline of January 20th itself.

As on Q2 end, Manappuram Finance had a branch network of 3,293 branches across 26 states, with assets under management worth Rs. 9,202 crore. It has been the first publicly listed gold loan company. Manappuram currently has 50 tonnes of gold in its lockers.

Manappuram Finance Ltd is led by its Founder VP Nandakumar, a former banker, who currently serves as its Managing Director. Its Executive Director I Unnikrishnan is a veteran Chartered Accountant and seasoned NBFC specialist.

On the equity front it has been one of India’s most impressive wealth creators. Between 2003 and 2010, Manappuram’s stock price had appreciated by 633 times.

Top non-promoter or public shareholders in Manappuram Finance include some of the world’s largest and most discerning funds like Hudson, Baring, Wellington, HSBC, Smallcap World Fund, Beaver, Sanlam, and BRIC II.

The current NCD offer has different options according to the requirements of its prospective investors. While tenures range from 400 days to 70 months, interest payout options include monthly, yearly, or cumulatively at the end of the tenure. The face value of the NCD is Rs. 1000.

Looking at the interest structure as well as the applicable tax structure, Manappuram’s current NCD is most suited for retail investors at the lowest or most common tax bracket.

While the current NCD Issue is for the core gold loan business, Manappuram Finance is now all set for a major diversification foray into SME Finance and Housing Finance. Within 3 months, it will start its secured SME lending business, as already 80% of its customers are running some SME business. And within six months, Manappuram will start its housing finance business, as a subsidiary, most probably after taking over a suitable NBFC Housing Finance Company (HFC).

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