Kosamattam Finance Limited NCD Open - Should You Subscribe?

Kosamattam Finance Limited, a non-deposit-taking NBFC (non-banking financial company) that specializes in gold loans, has been known to periodically roll out Non-Convertible Debentures (NCDs) with appealing interest rates. For example, in July 2024, the company introduced secured NCDs offering interest rates of up to 10.25% per year, with yields reaching as high as 10.75%. These came with flexible tenure options ranging from 18 months to 7 years.

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About Kosamattam Finance Limited NCD

KFL is set to launch its 32nd debt offering of Secured Redeemable Non-Convertible Debentures (NCDs) on November 25th, 2024, with an effective yield of up to 10.25%.

The allocation breakdown includes:

• Category I: 10%
• Category II: 10%
• Category III: 30%
• Category IV: 50%

The issue is exclusively lead-managed by SMC Capitals Ltd., with KFin Technologies Pvt. Ltd. serving as the registrar and Vistra ITCL (India) Ltd. acting as the debenture trustee.

These NCDs are available with tenures of 18, 24, 30, 36, 39, 48, 60, and 84 months, offering coupon rates between 9.25% and 10.25%, depending on the investor's choice. Interest payments can be received either monthly or on a cumulative basis as per the investor’s preference.

About Kosamattam Finance Limited

The issue has been rated IND A-/Stable by India Ratings & Research Pvt. Ltd., indicating an adequate degree of safety concerning the timely servicing of financial obligations.

Over the past four fiscal years, the company has demonstrated consistent growth in both total income and net profit:

• FY20: Total income of ₹499.33 crore, net profit of ₹47.66 crore
• FY22: Total income of ₹624.79 crore, net profit of ₹80.00 crore
• FY23: Total income of ₹782.54 crore, net profit of ₹107.05 crore
• FY24: Total income of ₹858.94 crore, net profit of ₹113.70 crore
• For the first half of FY25 (ending September 30, 2024), the company reported a total income of ₹437.67 crore and a net profit of ₹59.24 crore.

As of September 30, 2024, the company’s paid-up equity capital stands at ₹226.00 crore, supported by free reserves of ₹760.82 crore. Its debt-to-equity ratio, currently at 5.37, is expected to rise to 5.58 following this debt issuance.

This steady financial performance and the credit rating underscore the company's capability to meet its financial commitments.

In Conclusion

Kosamattam Finance’s NCDs offer a solid opportunity for higher returns compared to traditional fixed deposits, especially given their secured nature and the company’s reliable financial performance.  Beyond gold loans, the company offers a range of fee-based services such as microfinance, money transfers, power generation, foreign currency exchange, agricultural services, and air ticketing.

As of March 31, 2024, Kosamattam Finance had 986 branches across multiple states and employed over 3,842 individuals.