MUTHOOT FINANCE ISSUES NCD

Written by HARIKRISHNAN.T
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India's largest gold loan NBFCs company Muthoot Finance is issuing NCD (Non -Convertible Debentures).

Muthoot Finance Ltd has reserved 60 percent of it's Rs.500 crore maiden NCD issue for retail investors.

The company has a greenshoe option of an additional Rs.500 crore. Greenshoe options gives the underwriter the right to sell investors more shares than originally planned by the issuer.

So company is planning to raise Rs.1, 000 crore through the issue of NCDs.

To attract retail investors, the company offers a higher coupon rate of 12.25 percent for tenors of three and five years and a 12 percent for tenor of two years.

For institutional investors, it offers a coupon rate of 12 percent for three and five years and 11.75 percent for two years.

Actually the company is raising money for 2-5 years and typically it is  long-term in nature.

"We are long-term players and we are not averse to taking long-term debt in our book", said Mr.George Alexander Muthoot, Managing Director, Muthoot Finance.

The face value of each NCD is Rs.1, 000 and the minimum application is for five NCDs (Rs.5, 000). The NCDs are proposed to be listed on the NSE and BSE.

Credit rating agency Crisil assigns 'A' rating to Muthoot Finance NCD programme.

Regards Hari "लोका समस्ता सुखिनो भवन्तु"



S&P DOWNGRADE IMPACT, 1,129 STOCKS HIT 52 WEEK LOWS

Written by HARIKRISHNAN.T
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Receding FII inflows, poor corporate performance, and uncertainty on the domestic macro-economic front have sent several stocks to their 52 week lows in the last 10 days.

According to the data from Bloomberg, the major global provider of 24 hour financial news and information including real time and historic data, around 40 percent of the BSE stocks hit their 52 week low since the markets crashed on August 5 following the downgrade of S&P.

Of the 2, 833 stocks listed in BSE, 1, 129 hit year lows in the last 10 days against about 80 that hit year high.

On Tuesday alone, 272 of the BSE stocks hit their 52-week lows, while 30 companies hit their 52 week high.

The major stocks which saw their 52 week low is given below.

What is the main reason for this drastic correction....????

When we observe the stocks listed in BSE, we can see that about 57 percent of the stake of the BSE companies is owned by promoters and Indian Government, who basically BUY and HOLD the securities.

The active trading of the securities is carried out by FIIs, there by controlling the flow of the market and stocks.

The next important thing is the rate hike of RBI. The increase in the interest rates by the RBI has also put company margins under pressure. In the last 16 months, the RBI increased the interest rate by 425 bps, which leads to weaker domestic earnings. Another 25bps interest hike is expecting from RBI soon.

Emerging markets such as India have started looking unattractive to foreign investors. I think this negative trend only lasts for short term point of view.

" We are probably very close to the lows of the year; the reason I don't emphatically say this is the buying moment is we have an inflation problem in the big emerging markets" Said Mr. Adrian Mowat, the chief Asia and emerging-markets strategist at JPMorgan, in an interview to Bloomberg.

Experts are divide on whether the current market situation is conductive for investments. Some fund managers say that the time may be right for investors to look out for companies with good growth prospects and buy into the shares for long term gains. However others feel that the markets will drift further. Which will be correct.....??? Lets see.... :-)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



HOW CAN WE MEASURE THE LIQUIDITY OF A COMPANY

Written by HARIKRISHNAN.T
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Yesterday I came across an interesting article in Business Line, written by P.Saravanan and N.Sivasankaran. The article was about how can we calculate the liquidity of companies. A short description of that article is given below.

Accountants in fact size up companies on three main parameters- Profitability, Liquidity and Solvency measures. From this three things we can say that Liquidity and Profitability are inter related and inter connected.

Lets discuss the ways in which one can measure the liquidity position of a company.

UNDERSTANDING LIQUIDITY

Before going to calculate the liquidity, we first know what is meant by liquidity. We can define liquidity as the ability of a company to meet it's immediate obligations without any trouble or strain.

The obligations may consist of items such as accounts payable for the suppliers of raw materials, taxes payable, utilities payable and other expenses. 

Normally how a company pay all these obligations...????? It is through CASH.

Where from an organisation gets the required cash for meeting all these obligations....???? It gets cash from the existing cash balance in hand, bank account balances and realization of cash by converting the current assets such as cash receivable, note receivable and inventories into cash.

WHAT IS THE IMPORTANCE OF THE ABOVE STATEMENT

From the above statement we can say that Liquidity contributes to Profitability. So what will happen if a company's liquidity position is poor...?? This means that the organisation is finding hard to meet it's payment obligations to outsiders such as suppliers of material.

If this situation continues, the suppliers will not supply the required materials for production. So the company can't achieve its marketing objectives.

TRADITIONAL MEASURES

There are mainly 2 traditional measures for measuring the liquidity of a company.

1) Current ratio
2) Liquidity or Quick Ratio (Acid-test ratio)

The current ratio is calculated by dividing the total of current assets by current liabilities. Here current assets can be of assets that are convertible into cash in one year or one operating cycle, which one is higher.

Similarly current liabilities are those obligations that are to be settled in one year or one operating cycle, which ever is longer.

A current ratio of 2:1 is considered to be good/satisfactory in theory. This indicate the company has Twice the amount of money invested in current assets than that of current liabilities.

The difference between current ratio and Quick ratio is that Quick ratio divides the Liquid assets by the current liabilities of a company.

Here Liquid assets include all the current assets except inventories and pre-paid expenses.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "