Kosamattam Finance Limited- A Look into Bond Public Issue

Kosamattam Finance Limited issued Secured, Rated, Listed, Redeemable Non-Convertible Debentures on 19 July 2024  which is closing on  01, August 2024. Rated A-/ Stable by India Ratings, it presents an attractive investment opportunity for investors,  with a minimum investment of just Rs.10,000. This blog provides an overview of the company, the issue, and its financial performance. Given below are the details of the issue.
Issue Highlights 
Issuer– Kosamattam Finance Limited
Nature of Instrument– Secured, Rated, Listed, Redeemable, Non-convertible Debentures
Rating– A-/Stable by INDIA Ratings
Seniority– Senior Secured
Face Value– Rs. 1,000 per NCD
Base Issue Size– Rs. ₹ 10,000 lakhs with an option to retain oversubscription up to Rs. ₹10,000  lakhs aggregating up to Rs. 20,000 lakhs
Tenor– 18/24/30/36/39/60/48/84 months
Issue Date– 19, July 2024 to 01 August, 2024
Highest yield– up to 10.75%
Allotment- FIRST COME FIRST SERVE BASIS
Terms of the Issue:

About the Company

Kosamattam Finance Limited (KFL) is a systemically important non-deposit-taking NBFC primarily engaged in the gold loan business, lending money against the pledge of household jewelry. 
Headquartered in Kottayam, Kerala, KFL is a part of the “Kosamattam Group” led by Mathew K. Cherian.  As of June 30, 2024, the company has a network of 987 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, Maharashtra, Uttar Pradesh, and Telangana along with the Union Territory of Puducherry with 3842 employees. 
Besides its core business of gold loans, KFL is also involved in fee-based ancillary services which include microfinance, money transfer services, foreign currency exchange, power generation, agriculture, and air ticketing services.

Performance Highlights of Kosamattam Finance Limited as of March 31, 2024

Financial Parameters of the Company:

Particulars 
FY 2024
FY 2023
FY 2022

Net worth
92,756.94
76,399.26
65,699.56

Cash and cash equivalents
2,738.22
3,772.30
7,301.97

Loans (AUM)
5,31,034.74
4,84,569.06
4,00,725.00

Interest Income
85,399.12
77,851.56
62,126.39

Profit after tax for the year
11,407.12
10,699.30
7,892.07

% Stage 3 Loans on Loans
1.44%
1.58%
1.55%

% Net Stage 3 Loans on Loans
0.52%
0.68%
0.95%

Tier I Capital Adequacy ratio (%)
16.16%
14.56%
14.45%

Tier II Capital Adequacy Ratio (%)
2.26%
3.15%
4.20%

Competitive Strengths
The company’s growth and expansion have been driven by various key factors, including the following.

KFL belongs to the Kosamattam Group, known for its extensive operating history and large customer base.

Over the years, KFL has been increasing its customer base mainly due to its market penetration in areas that are not much catered by organized lending institutions and the streamlined procedural formalities that customers need to complete a loan transaction.

Vast branch network spanning across rural and semi-urban areas in South India.

As of June 30, 2024, KFL operates through 987 branch offices spread across 8 states and 1 union territory. It started its operations in rural areas and small towns and strategically targeted regions with low credit penetration. 

Well-organized and efficient IT infrastructure.

KFL uses information technology to effectively manage operations, market to target customers, and monitor and control risks. This system has contributed to enhancing its customer service by diminishing transaction time and complying with regulatory record-keeping and reporting requirements.

Robust risk management system including appraisal, internal audit, and inspections.

The primary aim of KFL’s risk management system is to evaluate and monitor the various risks that they undergo and implement policies and procedures to handle the same. The audit system consists of both accounts audit and gold appraisals.

Highly experienced management team and skilled personnel.

The Board, promoters, and senior management of KFL consist of seasoned professionals whose expertise provides a competitive edge in the gold loan industry and have been instrumental in maintaining resilience through industry cycles.
Source: Information Memorandum
Investor Categories 
The investor categories in a bond public issue can be described as the different segments or types of investors who can participate in the offering. The allocation ratio is determined by the issuer based on the guidelines set by regulatory bodies such as SEBI, aiming to distribute the existing bonds among different sets of investors. Here is the allocation ratio for the Kosamattam Finance Limited Public Issue across these investor categories.
Category I– Institutional Portion– 10% of the overall issue size- Public Financial Institutions, Insurance companies, Scheduled Banks, Provident Funds, AIFs, etc.
Category II– Non-institutional Investors- 10% of the overall issue size- Companies, Co-operative Banks, Trusts, Partnership Firms, Association of Persons, etc.
Category III– High Net-worth Individual Investors– 30% of the overall issue size- Resident Indian individuals or Hindu Undivided Families through the Karta applying for an amount aggregating to above Rs. 10,00,000 across all options of NCDs in the Issue.
Category IV– Retail– 50% of the overall issue size- Resident Indian Individuals or Hindu Undivided Families through Karta applying for an amount aggregating up to and including Rs. 10,00,000. 

How to Apply through TheFixedIncome?

Information Memorandum:
An Information Memorandum (IM) can be defined as a comprehensive document furnishing investors with in-depth information about the bond offering. It provides detailed insights into the issuer’s business, financial background, management team, details of offerings, associated investment risks, and fund allocation from the issue, besides regulatory and legal disclosures.
The link to the Information Memorandum of bond public issue of Kosamattam Finance Ltd. is given below:
https://www.thefixedincome.com/storage/bondprimary_imfiles/1721461084KFL.pdf
Conclusion
Summing up, the bond public issue by Kosamattam Finance Limited presents an attractive opportunity for investors interested in investing in Secured Rated Listed Redeemable Non-Convertible Debentures. Investors can take advantage of this opportunity and avail the returns associated with the public issue. However, it is recommended that before investing, investors must go through the IM thoroughly and take into account their risk appetite and investment objectives.
Disclaimer: This article is based on publicly available information and other sources believed to be reliable. The information provided in this article is intended for general, educational, and awareness purposes only and should not be considered a comprehensive disclosure of every material fact. It should not be interpreted as investment advice for any individual or entity. The article makes no guarantees regarding the completeness or accuracy of the information and disclaims all liabilities, losses, and damages arising from the use of this information. Investments in the debt market are subject to market risk, kindly read all the documents carefully.