Month: January 2019
Tips to Keep in Mind While Investing in an IPO
India Infoline Finance Limited (IIFL) 10.50% NCDs – January 2019 Issue
This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]
India Infoline Finance Limited (IIFL) is coming out with its public issue of non-convertible debentures (NCDs) from tomorrow, 22nd of January. The company wants to raise Rs. 2,000 crore from this issue, including the green-shoe option of Rs. 1,750 crore, and is offering interest rate in the range of 9.60% for 39 months and 10.50% for 120 months.
The issue is scheduled to close on February 20, unless the company decides to close the issue prematurely as it is able to raise the desired amount before the scheduled closing date. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CRISIL and ICRA.
Before we check how the issue looks from an investment point of view, let us take a look at some of its key features:
Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 1,750 crore, making the total issue size to be Rs. 2,000 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.
Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 10.50% p.a. for a period of 120 months, 10.20% p.a. for 60 months and 9.60% p.a. for 39 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available with 120 months and 60 months tenors, and coupon rates for these periods will be 10% p.a. and 9.75% p.a. respectively, interest payable on a monthly basis.
ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, effective October 1, 2018. So, you are no longer required to issue cheques to apply for these NCD issues. In case of physical applications, you need to sign on the application form as per your bank records.
Credit Rating & Nature of NCDs – CRISIL, ICRA and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CRISIL and ICRA have rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, 39-month and 60-month NCDs are ‘Secured’ in nature, whereas 120-month NCDs are ‘Unsecured’ in nature.
NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.
Categories of Investors – The company has decided to categorise investors in the following four categories:
Category I – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 400 crore
Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 400 crore
Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 600 crore
Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 600 crore
Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.
Minimum Investment – An investor needs to invest a minimum of Rs. 10,000 in this issue i.e. 10 NCDs worth Rs. 1,000 each.
Listing, Premature Withdrawal – These NCDs are proposed to be listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 6 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on either of the stock exchanges.
Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.
No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR.
But, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.
Should you invest in India Infoline Finance Limited (IIFL) NCDs?
As there was no fresh flow of bad news from the domestic markets, as well as from the global front, market sentiment has improved somewhat in the last 15 days or so. But, is it some kind of calm before the storm? Nobody knows with certainty. But, one thing I am very confident of, like 2018, 2019 will also have high volatility in both equity, as well as the bond markets. US-China trade war, slowdown of economic growth both in China, as well as the US, India’s twin deficit problem and the crucial general elections here in India, all these are very important events to be closely monitored, and will play a very crucial role in market movement going ahead.
But, as far as the NBFCs’ liquidity crisis is concerned, I think the situation was not as bad as it was made out to be and it should improve going forward. RBI is taking all measures possible to defy the crisis, and easing global crude prices has also worked in allaying the fear among the investors.
As far as this issue is concerned, I think the interest rate for the 39-month option is low for my expectations, and 120-month investment period is too long a period to for my investments with a private company. So, if I were to invest in this issue, I would have opted for the monthly interest option of 60-month investment period, i.e. Series III. I don’t know when the NHAI is going to launch its public issue of taxable bonds, but I would advise the conservative investors to wait for it, as it makes more sense to invest in debt securities of government companies as compared to the private companies.
Application Form of India Infoline Finance Limited NCDs
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in IIFL NCDs, you can contact us at +91-9811797407
Shriram Transport Finance 9.70% NCDs – January 2019 Issue
This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]
Shriram Transport Finance Company Limited (STFCL) is launching its public issue of non-convertible debentures (NCDs) from today, January 7, 2019. This will be the third public issue of NCDs by the company this financial year. The company plans to raise Rs. 700 crore from this issue, including the green shoe option of Rs. 500 crore.
These NCDs will carry coupon rates in the range of 9.12% per annum to 9.70% per annum, resulting in an effective yield of 9.39% p.a. to 9.70% p.a. for the investors. The issue is scheduled to close on January 31, unless the company decides to foreclose it.
Before we take a decision whether to invest in this issue or not, let us first check the salient features of this issue.
Size & Objective of the Issue – Base size of the issue is Rs. 200 crore, with an option to retain oversubscription of an additional Rs. 500 crore, making the total issue size to be Rs. 700 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.
Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.70% p.a. for a period of 10 years, 9.50% p.a. for 5 years and 9.40% p.a. for 3 years. These interest rates would be applicable for annual interest rate options only. Monthly interest payment option is also available for 5 years and 10 years, with coupon rates of 9.12% p.a. and 9.30% p.a. respectively. For 3 years and 5 years, cumulative interest payment option is also there, with an effective yield of 9.40% and 9.50% respectively.
Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have the below mentioned percentage fixed in the allotment:
Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 70 crore
Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 70 crore
Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 280 crore
Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 280 crore
Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.
NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.
Credit Rating & Nature of NCDs – CRISIL and India Ratings have rated this issue as ‘AA+’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature.
Listing, Premature Withdrawal – These NCDs are proposed to get listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 6 working days after the issue gets closed. The investors will not have the option to prematurely redeem these NCDs back to the company, however the investors can always sell these NCDs on any of the stock exchanges.
ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for these debt issues also effective October 1, 2018. So, no cheque would be required to apply for these NCDs now.
Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.
No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR. Moreover, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.
Minimum Investment Size – The company has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.
Should you invest in Shriram Transport Finance 9.70% NCDs?
There has been a considerable volatility in the stock markets, as well as the bond markets in the past 4-5 months. Market volatility is expected to continue in 2019 as well. So, the conservative investors are advised either to avoid the equity investments at least for the next 6 months or so, or invest in equities in a phased manner.
As far as fixed income investments are concerned, I expect the interest rates to remain range bound with a downward bias for the next 6 months or so. Post that, I think it would primarily depend on two factors – one, the elections outcome in May this year, and the other, macro economic outlook for India as well as China and the US.
As mentioned above as well, this is the third public issue by Shriram Transport Finance in the current financial year. Interest rates offered by the company in this issue are exactly the same as they were in the second issue of October 2018, and slightly higher than the first issue of June 2018. Still, I find these rates to be on a lower side of my expectations from a private company. I would have liked the company to offer 10%+ coupon rate for the 3-year or 5-year investment period option. Again, as the interest rates expected to be offered by the NHAI in the range of 8.50% and 9% for a period of 5 years to 10 years, I would like to consider the NHAI issue first before committing my funds elsewhere.
Application Form of Shriram Transport Finance NCDs
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in STFC NCDs, you can contact us at +91-9811797407
Mahindra & Mahindra Financial Services 9.50% NCDs – January 2019 Issue
This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]
Mahindra & Mahindra Financial Services Limited (MMFSL) is launching its public issue of non-convertible debentures (NCDs) from Friday this week, January 4, 2019. This will be the first public issue of NCDs by the company this financial year. The company plans to raise Rs. 3,500 crore from this issue, including the green shoe option of Rs. 3,000 crore.
These NCDs will carry coupon rates in the range of 9.05% to 9.50%, resulting in an effective yield of 9.07% to 9.50% for the investors. The issue is scheduled to close on January 25, unless the company decides to foreclose it.
Before we take a decision whether to invest in this issue or not, let us first check the salient features of this issue.
Size & Objective of the Issue – Base size of the issue is Rs. 500 crore, with an option to retain oversubscription of an additional Rs. 3,000 crore, making the total issue size to be Rs. 3,500 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.
Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.50% p.a. for a period of 120 months (10 years), 9.30% p.a. for 96 months (8 years), 9.15% p.a. for 60 months (5 years) and 9.05% p.a. for 39 months (3.25 years). Interest will be paid only on an annual basis, as the company has not provided any other interest rate payment option.
Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have the below mentioned percentage fixed in the allotment:
Category I – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 700 crore
Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 700 crore
Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 1,050 crore
Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 1,050 crore
Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.
NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.
Credit Rating & Nature of NCDs – CARE and India Ratings have rated this issue as ‘AAA’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature, except Series IV NCDs, the 120-months investment period option. Series IV NCDs are ‘Unsecured’ in nature.
Listing, Premature Withdrawal – These NCDs are proposed to get listed only on the Bombay Stock Exchange (BSE). The listing will take place within 6 working days after the issue gets closed. The investors will not have the option to prematurely redeem these NCDs back to the company, however the investors can always sell these NCDs on the stock exchange.
Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs as the company is not providing the option to apply for these NCDs in physical or certificate form.
No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR. Moreover, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if held in physical form and annual interest income is more than Rs. 5,000, TDS @ 10% will get deducted.
Minimum Investment Size – The company has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.
Should you invest in Mahindra & Mahindra Financial Services 9.50% NCDs?
The ongoing trade war between the US and China has resulted in a lot of volatility in the financial markets worldwide. Investors have also turned cautious with respect to the economic growth prospects of both these countries. Considering a high probability of these two major economies getting slower in 2019, interest rates are also expected to go down following some dovish measures expected to be taken by the central banks worldwide, including India.
So, it creates a base case in favour of some of the good fixed income investments yielding high returns at present. Do these NCDs fall in that category of attractive fixed income investments? I would say ‘Yes’, if you are a relatively conservative investor, and considering these NCDs are ‘AAA’ rated. As these NCDs are carrying higher interest rates as compared to the bank fixed deposits, they seem relatively attractive to invest in.
However, considering that ECL Finance and SREI Equipment Finance are offering 10%+ returns on their respective NCDs, I would say interest rates offered by Mahindra are on a lower side for my expectations. I would rather wait for the NHAI to launch its bonds issue sometime this month and announce its interest rates, which I expect should be closer to 9% for a 10-year option.
Application Form of Mahindra & Mahindra Financial Services 9.50% NCDs
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in Mahindra & Mahindra Financial Services NCDs, you can contact us at +91-9811797407