New Bond Issue with FD-Beating ‘Monthly Interest’!
The current market environment is definitely quite volatile which is swinging stocks up and down with a good magnitude. The volatility in the broader market index itself is leading to 1% – 2% intraday moves, let alone individual stocks. Conservative investors who put their money in debt securities are having a good time, all thanks to the rising interest rate environment.
Investing in bonds not just helps to tone down the overall volatility of the portfolio but also helps in generating extra income in the form of interest. If you are looking at an alternative to a fixed deposit that could fetch you some extra return at the cost of a slightly higher risk, then you should know about the ongoing bond issue from Muthoot Finance (NS:).
It is a listed consumer finance firm with a market capitalization of INR 41,331 crores. In FY22, the company posted a record net profit of INR 4,016.61 crores on account of the highest-ever revenue of INR 12,237.46 crores. In fact, the net income is growing at a 5-year CAGR of 27.3%, compared to the industry’s average of 17.8%.
Coming to its bond issue, the company is currently offering Series II bonds with an interest payment of 7.75% per annum and a face value of INR 1,000. An attractive component of this issue is that the interest payment is on a monthly basis. This means, investors are not only getting a better interest than a conventional FD but the frequency of payment is monthly as compared to a generally yearly payment mechanism in an FD. The tenure of these bonds is of 60 months, i.e. 5 years.
Coming to the credit ratings of this bond, ICRA (NS:) has given an AA+ rating with a ‘stable’ outlook. More importantly, these bonds are ‘secured’, which means the money that the company is raising is backed by its assets. These bonds have a ‘Senior’ status, meaning in case of default, these bondholders would be preferred first over the others in terms of payment of their dues.
With that being said, although these bonds would be listed on the NSE after their issue which gives buyers a chance for a pre-mature exit, the liquidity in the debt market is quite poor. Hence, it is advisable that investors should not buy these bonds for trading purposes as it would be very hard to find buyers in the secondary market at your quoted sell price.
Disclaimer – The above article shall not be deemed as a recommendation to buy/sell/hold any mentioned security. Investors can check the company’s website for more details.
The current market environment is definitely quite volatile which is swinging stocks up and down with a good magnitude. The volatility in the broader market index itself is leading to 1% – 2% intraday moves, let alone individual stocks. Conservative investors who put their money in debt securities are having a good time, all thanks to the rising interest rate environment.
Investing in bonds not just helps to tone down the overall volatility of the portfolio but also helps in generating extra income in the form of interest. If you are looking at an alternative to a fixed deposit that could fetch you some extra return at the cost of a slightly higher risk, then you should know about the ongoing bond issue from Muthoot Finance (NS:).
It is a listed consumer finance firm with a market capitalization of INR 41,331 crores. In FY22, the company posted a record net profit of INR 4,016.61 crores on account of the highest-ever revenue of INR 12,237.46 crores. In fact, the net income is growing at a 5-year CAGR of 27.3%, compared to the industry’s average of 17.8%.
Coming to its bond issue, the company is currently offering Series II bonds with an interest payment of 7.75% per annum and a face value of INR 1,000. An attractive component of this issue is that the interest payment is on a monthly basis. This means, investors are not only getting a better interest than a conventional FD but the frequency of payment is monthly as compared to a generally yearly payment mechanism in an FD. The tenure of these bonds is of 60 months, i.e. 5 years.
Coming to the credit ratings of this bond, ICRA (NS:) has given an AA+ rating with a ‘stable’ outlook. More importantly, these bonds are ‘secured’, which means the money that the company is raising is backed by its assets. These bonds have a ‘Senior’ status, meaning in case of default, these bondholders would be preferred first over the others in terms of payment of their dues.
With that being said, although these bonds would be listed on the NSE after their issue which gives buyers a chance for a pre-mature exit, the liquidity in the debt market is quite poor. Hence, it is advisable that investors should not buy these bonds for trading purposes as it would be very hard to find buyers in the secondary market at your quoted sell price.
Disclaimer – The above article shall not be deemed as a recommendation to buy/sell/hold any mentioned security. Investors can check the company’s website for more details.