KLM Axiva Finvest, a non-banking finance company (NBFC), is set to issue secured redeemable non-convertible debentures (NCDs). The total issue size is Rs 75 crore, with a green-shoe option to retain oversubscription up to an additional Rs 75 crore, bringing the total potential issue size to Rs 150 crore.
The KLM Axiva Finvest NCD issue will be open from July 22, 2024, to August 2, 2024. These are secured, redeemable, non-convertible debentures. Each NCD is priced at Rs 1000, with a face value of Rs 1000. The minimum lot size for investment is 10 NCDs.
The NCDs will be offered in 10 different series with fixed coupon rates and various tenures, including 400 days, 16 months, 18 months, 2 years, 3 years, 5 years, and 79 months. Investors have the option to choose between annual, monthly, and cumulative interest payments. The coupon rates for these NCDs range from 9.50% to 11% per annum, while the effective yield ranges from 9.92% to 11.30% per annum.
These NCDs have been rated “ACUITE BBB/Stable” by Acuite Ratings & Research and “IND BBB-/Stable” by India Ratings & Research. These ratings indicate a moderate degree of safety concerning the timely servicing of financial obligations and a moderate credit risk. The funds raised from this issue will be used for onward lending, financing, repayment/prepayment of principal and interest on existing borrowings, and general corporate purposes.
The NCDs will be listed on the BSE, and they will be issued at a face value of Rs 1,000 each. The minimum application size for investors across all categories is Rs 10,000.
| Particulars | Series 1 | Series 2 | Series 3 | Series 4 | Series 5 |
| Frequency of Interest Payment | Monthly | Cumulative | Monthly | Monthly | Annual |
| Nature | Secured | Secured | Secured | Secured | Secured |
| Tenor | 400 Days | 16 Months | 18 Months | 2 Years | 2 Years |
| Coupon (% per Annum) | 9.50% | NA | 9.85% | 10.00% | 10.25% |
| Effective Yield (% per Annum) | 9.92% | 9.96% | 10.31% | 10.47% | 10.25% |
| Amount on Maturity (In Rs.) | Rs 1,000 | Rs 1,135 | Rs 1,000 | Rs 1,000 | Rs 1,000 |
| Particulars | Series 6 | Series 7 | Series 8 | Series 9 | Series 10 |
| Frequency of Interest Payment | Monthly | Annual | Monthly | Annual | Cumulative |
| Nature | Secured | Secured | Secured | Secured | Secured |
| Tenor | 3 Years | 3 Years | 5 Years | 5 Years | 79 Months |
| Coupon (% per Annum) | 10.25% | 10.50% | 10.75% | 11.00% | NA |
| Effective Yield (% per Annum) | 10.75% | 10.50% | 11.30% | 11.00% | 11.10% |
| Amount on Maturity (In Rs.) | Rs 1,000 | Rs 1,000 | Rs 1,000 | Rs 1,000 | Rs 2,000 |
KLM Axiva Finvest operates as a non-deposit taking systemically important NBFC, focusing on serving low- and middle-income individuals and businesses with limited or no access to formal banking and finance channels. The company operates primarily in four business verticals: gold loans, loans for micro, small, and medium enterprises (MSMEs), personal loans, and microfinance loans. As of 30 June 2024, KLM Axiva Finvest manages operations through 670 branches spread across six states: Kerala, Karnataka, Tamil Nadu, Telangana, Andhra Pradesh, and Maharashtra, with its corporate office located in Kochi.
Over the past four fiscal years, KLM Axiva Finvest has shown steady growth in its financial performance. The company reported total income and net profit figures of Rs. 126.52 crore and Rs. 7.06 crore for FY21, Rs. 185.91 crore and Rs. 11.38 crore for FY22, Rs. 278.75 crore and Rs. 18.33 crore for FY23, and Rs. 315.92 crore and Rs. 23.03 crore for FY24. This reflects consistent growth in both revenue and profit.
The company’s debt-equity ratio, currently at 6.06, is expected to increase to 6.63 following this debt issue. Additionally, its net non-performing assets (NPA) improved significantly, dropping from 2.70% on March 31, 2022, to 0.67% on March 31, 2024.
Conclusion
Although the company has shown better financial performance and reduced its NPAs while increasing its business volume, its low credit rating is a concern. The attractive coupon rates are tempting, but the BBB- rating indicates some risk. It might be safer to skip this somewhat risky debt offer.
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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