Muthoot Finance issue fails to mop up Rs 600 crore from HNIs

HIGH NET worth individuals (HNI) appear to have given a tepid response to Kochi-based Muthoot Finance's Rs 600 crore nonconvertible debentures issue that closed last week.

Muthoot Finance, the country's largest gold loan firm, planned to mop up Rs 600 crore from investors that includes a green shoeoption of Rs 300 crore.

With HNIs showing less than expected interest, Muthoot managed to collect Rs 470 crore, according to merchant bankers handling the issue. The issue closed on January 7.

This is around 21 per cent lower than the targeted amount that was to be used by the firm for financing, debt repayment and capital expenditure.

The total HNI participation was around Rs 90 crore while we had estimated participation to the tune of Rs 240 crore from them.

When reached by Financial Chronicle, top Muthoot Finance officials did not immediately disclose the figures. KR Bijimon, chief general manager and CEO of Muthoot Finance said,

Experts tracking debt market issues feel that simultaneous issue of tax-free bonds by NHAI (December 28, 2011 to January 11, 2012) and PFC (December 30, 2011 to January 16, 2012) may have influenced the HNI investment levels.

Investors who have already completed their tax savings are attracted by high yielding NCD to take advantage of good returns.

While HNIs who are looking to save tax on interest income and pensioners are looking for steady tax free income and are attracted towards bonds issues such as NHAI and PFC tax saving bonds.

Both these issues were falling under the category of tax-free bonds where the investor's interest income is tax exempted. Due to heavy over-subscription, the combined mop-up from both these issues was around Rs 35,000 crore.

HNI investments in both these issues were more than expected, which might have otherwise gone towards Muthoot NCD issue. However as a silver lining, retail investment in Muthoot Finance NCD was in line with the expectations. The entire Rs 240 crore earmarked for retail investors was fully subscribed.

 

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