Manappuram Finance issue NCDs to maintain strong capital position

The shares of Manappuram Finance gave all the intraday gains despite the announcement that the company’s management has approved the allotment of NCDs, on Friday.

The company had earlier informed that its board will consider fundraising via issuance of redeemable, non-convertible debentures (NCDs) for Rs 100 crore with an option of retaining oversubscription up to Rs 400 crore. On Friday, the company announced in a press note that its board has approved the allotment of secured, redeemable, NCDs aggregating Rs 100 crore on a private placement basis. The tenure of the instruments is for a period of three years and the interest rate offered on the coupons is nine per cent. This is 10 bps lower than that of its last reported average cost of borrowing.

The company already has strong liquidity position with capital adequacy at 23.36 per cent as of third quarter of FY20. Fundraising in difficult times such as now, can help the company avail opportunity to spread its business after the lockdown period is over. It can be expected that due to high gold prices and branch network to small credit seekers, the good  advances growth can be seen. The business also would show high sustainability due to its short-term loans and recovery period of as small as three months, which may not face high risk of defaults due to the current lockdown. It also has nearly 44 per cent share of online gold loan schemes, reducing risk due to the lockdown.

At 3.00 pm on Friday, the stock was trading at Rs 119.70, down by two and half a per cent on BSE.