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Kosamattam Finance, a Kerala-based NBFC specializing in gold loans, is offering a Non-Convertible Debentures (NCD) issue. The issue, open from July 19 to August 1, 2024, has a base size of Rs 100 crore, with an option to oversubscribe for an additional Rs 100 crore, totalling Rs 200 crore. Investors can choose from eight different NCD series (Series I-VIII) with various tenures and interest payout options. The coupon rates range from 9.25% to 10.25% per annum, and the effective yield ranges from 9% to 10.75% per annum. The minimum investment is Rs 10,000 (10 NCDs), with each NCD having a face value of Rs 1,000. These secured NCDs will be listed on the BSE.
The NCDs are rated “IND A-/Stable” by India Ratings, indicating an adequate degree of safety with low credit risk. Kosamattam Finance plans to use at least 40% of the net proceeds for onward lending, up to 35% for repaying existing debts, and a maximum of 25% for general corporate purposes. As of March 31, 2024, Kosamattam Finance operates 986 branches across Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Uttar Pradesh, Telangana, and Puducherry.
| Particulars | Series 1 | Series 2 | Series 3 | Series 4 |
| Frequency of Interest Payment | Cumulative | Monthly | Cumulative | Monthly |
| Nature | Secured | Secured | Secured | Secured |
| Tenor | 18 Months | 24 Months | 30 Months | 36 Months |
| Coupon (% per Annum) | NA | 9.25% | NA | 10.00% |
| Effective Yield (% per Annum) | 9.00% | 9.65% | 9.41% | 10.47% |
| Amount on Maturity (In Rs.) | Rs 1,138 | Rs 1,000 | Rs 1,252 | Rs 1,000 |
| Particulars | Series 5 | Series 6 | Series 7 | Series 8 |
| Frequency of Interest Payment | Cumulative | Monthly | Cumulative | Cumulative |
| Nature | Secured | Secured | Secured | Secured |
| Tenor | 39 Months | 60 Months | 48 Months | 84 Months |
| Coupon (% per Annum) | NA | 10.25% | NA | NA |
| Effective Yield (% per Annum) | 9.75% | 10.75% | 10.67% | 10.41% |
| Amount on Maturity (In Rs.) | Rs 1,353 | Rs 1,000 | Rs 1,500 | Rs 2,000 |
Kosamattam Finance Ltd. (KFL) is a non-deposit-taking NBFC – Middle Layer focused mainly on providing Gold Loans, where customers pledge their household jewellery. The company operates in Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Gujarat, Uttar Pradesh, Telangana, and the Union Territory of Puducherry. Headquartered in Kottayam, Kerala, KFL is part of the Kosamattam Group.
Gold Loans form the core of KFL’s business. Their customers include businessmen, vendors, traders, farmers, salaried individuals, and families who seek convenient and accessible credit by pledging their gold jewellery. KFL offers various Gold Loan schemes with different interest rates and per gram rates, allowing customers to select the best option for their needs. These schemes are regularly updated based on gold prices, market conditions, and regulations. Gold Loans are typically sanctioned for up to 12 months, with an option for early repayment.
Besides Gold Loans, KFL also provides ancillary services such as Microfinance, money transfer, foreign currency exchange, power generation, agriculture, and air ticketing. This diversification adds to their range of business activities.
This issue has been rated IND A-/Stable by India Ratings & Research Pvt. Ltd. This means that the instruments with this rating are considered to have a decent level of safety in terms of meeting financial obligations on time, and they carry a low risk of default.
This rating is not a recommendation to buy, sell, or hold these securities. Investors should make their own decisions. The rating might be changed, suspended, or withdrawn by the rating agency based on new information, so it should be evaluated accordingly.
Over the last four fiscal years, the company has shown consistent growth in both total income and net profits. In FY20, it recorded a total income of Rs. 499.33 crore and a net profit of Rs. 47.66 crore. This increased to Rs. 541.84 crore in total income and Rs. 65.25 crore in net profit in FY21. The upward trend continued in FY22 with a total income of Rs. 624.79 crore and a net profit of Rs. 80.00 crore. FY23 saw further growth, reaching Rs. 782.54 crore in total income and Rs. 107.05 crore in net profit.
Most recently, in FY24, the company’s total income stood at Rs. 858.94 crore, with net profits of Rs. 113.70 crore. As of March 31, 2024, the company has a paid-up equity capital of Rs. 226.00 crore and free reserves amounting to Rs. 701.59 crore. The debt-equity ratio, which was 5.39 on March 31, 2024, is expected to increase to 5.61 following the new debt issue.
Conclusion
The company frequently participates in the debt market, with this being its 31st offering since April 2014. It provides attractive coupon rates and holds an IND A-/stable rating. In a market where interest rates are firm, investors seeking steady and regular returns may consider allocating moderate funds to this offering with a medium to long-term investment perspective
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.
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