Friday, September 23, 2011

Muthoot Finance NCD is best debt option to invest says Tapse

``We found that the effective yield on investment offered by Muthoot Finance is attractive at 13.96%, The credit rating is also good which offers stable outlook, (`AA-/Stable` from CRISIL),`` said Prashant Tapse, Mehta Equities. He further said the following:

Minimum ticket size has purposefully been kept low at Rs 1,000 to encourage the retail currently trading at Rs 947. The capital adequacy ratio is reasonable good for Muthoot which is strong at 19.2% as of June 2011 as against mandatory requirement of 15%. The assets under management are close to Rs 180 billion.

The interest spreads (difference between interest earned and interest expended) of Muthoot was 10.9% for the quarter ended June 2011. The company has been raising money from retail investors for quite some time through private placement of secured NCDs.

As of June 2011, retail NCD borrowings accounted for 26% of overall borrowing. Hence considering the above rationale we recommend investors to `Buy` with an view to hold it till maturity.


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