Category: Investments

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]

2018 so far has turned out to be a roller coaster year for the equity, as well as the bond markets. Mid and small cap companies have seen a massive cut in their stock prices. Portfolios have seen a massive value erosion and sentiment has once again turned negative. Market analysts, who were recommending a higher allocation to equity till early this year, have also become cautious to advise higher equity investments. Some analysts are calling it start of a bearish phase.

Debt portion of portfolios are also facing the music. Bond yields have undergone huge volatility amid dynamic economic conditions and highly uncertain borrowing programme of the government. Overall, bond yields have risen so far in 2018. However, conservative investors haven’t got the opportunity to enjoy such high rates on their fixed deposits. Fixed deposit rates are still below 8-8.5% with most of the banks. Post the IL&FS and DHFL crisis, private NBFCs are finding it difficult to raise money from the debt markets.

In such a dynamic economic environment, as the investors want to opt for safer investment options, NHAI is soon coming up with its maiden public issue of taxable bonds for the retail investors. NHAI has already filed its draft shelf prospectus with SEBI on November 16, 2018, so the issue is expected to open in the first fortnight of December.

NHAI is yet to announce the key details of the issue, like launch date, rate of interest, duration of the bonds etc. The company wants to raise Rs. 10,000 crore from this issue and plans to utilize these funds to finance its ambitious Bharatmala Project.

I’ll update this post as the company announces further details. Here you have some of the salient features of the issue.

Size of the Issue – NHAI announced its plans to raise Rs. 62,000 crore through debt issuance this financial year. It has already raised approximately Rs. 29,000 crore by issuing bonds to the institutional investors on a private placement basis. Out of the remaining Rs. 33,000 crore, the company has decided to raise Rs. 10,000 crore from this issue.

Coupon Rates on Offer – The company is yet to announce the interest rates it is going to offer in this issue. However, the market speculation is that the company will offer rates between 8.50% to 9% per annum for a period of 3 years to 10 years. I’ll update this post as the company discloses its rates.

Rating of the Issue – CRISIL, ICRA, CARE and India Ratings, all rating agencies have assigned ‘AAA’ rating to this issue. Also, these bonds are ‘Secured’ in nature i.e. in case of any default in interest payments or principal repayment at the time of maturity, the bondholders will have the right to make claim on certain assets of the company.

NRI/QFI Investment Not Allowed – Like with most such recent NCD issues, Non-Resident Indians (NRIs) will not be able to make investments in this issue. Qualified Foreign Investors (QFIs) too are not eligible to invest in this issue.

Investor Categories & Allocation Ratio – The investors have been classified in the following four categories and the company is yet to announce what percentage of the issue will be reserved for each of the categories during the allocation process:

Category I – Qualified Institutional Bidders (QIBs)

Category II – Non-Institutional Investors (NIIs)

Category III – High Net Worth Individuals, including HUFs, investing more than Rs. 10 lakhs

Category IV – Resident Indian Individuals, including HUFs, investing up to Rs. 10 lakhs

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.

Listing & Allotment – Like its previous issues, NHAI has decided to get its bondss listed on both the stock exchanges i.e. National Stock Exchange (NSE) as well as Bombay Stock Exchange (BSE). NHAI will ensure that these bonds get allotted and listed on the stock exchanges within 6 working days from the closing date of the issue.

Demat A/c. Mandatory – Off late, these companies are making it impossible to apply for such bonds in physical/certificate form, and NHAI is no different. It has also made it mandatory to have a demat account in order to apply for these bonds. However, if you get these bonds allotted in your demat account, you will have the option to rematerialise them later in physical/certificate form if you decide to close your demat account.

No Lock-In Period – These bonds do not carry any lock-in period and you can buy/sell them on the stock exchanges at the market price whenever you want.

Loan Against Bonds – These bonds can be pledged or hypothecated for obtaining loans as per the terms set by the lending company.

Minimum & Maximum Investment – Investors are required to put in a minimum investment of Rs. 10,000 in this issue i.e. at least 10 bonds of face value Rs. 1,000 each. There is no upper limit for the investors to invest in this issue. However, an investor investing more than Rs. 10 lakhs will be categorized as a high networth individual (HNI) and the probability of full allotment is lower in the HNI category.

Interest Payment Date – NHAI is yet to announce the interest payment date for these bonds.

Record Date – For the payment of interest or the maturity amount, record date will be 15 days prior to the date on which such amount is due to be payable.

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]

JM Financial Credit Solutions, a venture between JM Financial Limited holding 50.01% and INH Mauritius holding 48.62%, is all set to launch its second issue of Non-Convertible Debentures (NCDs) this fiscal from the coming Tuesday, November 20, 2018. These NCDs will carry coupon rates in the range of 9.67% to 10.25%, resulting in an effective yield of 10% to 10.25% for the investors.

The company plans to raise Rs. 1,250 crore from this issue, including the green shoe option of Rs. 1,000 crore. The issue is scheduled to close on December 20, unless the company decides to close the issue prematurely once it is able to raise the desired amount before the scheduled closing date.

Before we take a decision whether to invest in this issue or not, let us first check the salient features of this issue.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, effective October 1. So, you are no longer required to issue cheques to apply for these NCD issues. In case of physical applications, you will have to sign on the application form as per your bank records.

Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 1,000 crore, making the total issue size to be Rs. 1,250 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 10.25% p.a. for a period of 120 months, 10.10% p.a. for 60 months and 10% p.a. for 42 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 would be 9.81% p.a. and 9.67% p.a. Respectively, interest payable on a monthly basis.

Credit Rating & Nature of NCDs – ICRA and India Ratings have rated this issue as ‘AA’ with a ‘Stable’ outlook. Moreover, these NCDs will be ‘Secured’ in nature.

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. 125 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 125 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 500 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 500 crore

NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

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.

Listing, Premature Withdrawal – These NCDs are proposed to get listed only on the Bombay Stock Exchange (BSE). The listing will take place within 12 working days after the issue gets closed. Though there is no option of a premature redemption, 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 in Demat Form – Interest income with such NCDs is taxable in the hands of the investors and you will have to pay tax on the interest income while filing your income tax return. Moreover, as demat account is mandatory to invest in this issue, no TDS would get deducted from your interest income on NCDs held in demat form.

But, in case you decide to close your demat account and keep these NCDs in a physical form, then the company will deduct TDS on the interest payable on the interest payment date. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000.

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 JM Financial Credit Solutions NCDs?

Application Form of JM Financial 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 JM Financial NCDs, you can contact us at +91-9811797407

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]

Manappuram Finance Limited is going to launch its public issue of secured non-convertible debentures (NCDs) from today, October 24, 2018. The company plans to raise Rs. 1,000 crore from this issue, including the green shoe option of Rs. 800 crore.

These NCDs will carry coupon rates in the range of 9.60% to 10.40%, resulting in an effective yield of 9.70% to 10.46% for the investors. The issue is scheduled to close on November 24, unless the company is able to raise the desired amount before that and decides to close the issue prematurely.

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. 800 crore, making the total issue size to be Rs. 1,000 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.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 10.40% p.a. for a period of 60 months, 10% p.a. for 36 months and 9.85% p.a. for 24 months. These rates would be applicable for annual interest payment and cumulative interest options only. Monthly interest payment option is available only with 36 months and 60 months tenors, and coupon rates for these periods would be 9.60% p.a. and 10% p.a. respectively.

There are two more options – one is for 400 days offering 9.70% effective yield and the other offers to double your money in 2,557 days, i.e. approximately 7 years, giving an effective yield of 10.40%.

ASBA Mandatory – Like IPOs, SEBI has made ASBA mandatory to apply for these debt issues also effective October 1. So, no cheque would be required to apply for these NCDs.

Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have rated this issue as ‘AA’ and ‘AA+’ respectively with a ‘Stable’ outlook. Moreover, these NCDs are ‘Secured’ in nature.

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. 100 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 100 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 300 crore

Category IV – Resident Indian Individuals including HUFs – 50% of the issue is reserved i.e. Rs. 500 crore

NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

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.

Listing, Premature Withdrawal – These NCDs are proposed to get listed on the Bombay Stock Exchange (BSE). The listing will take place within 12 working days after the issue gets closed. Though there is no option of a premature redemption, 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 in Demat Form – Interest income with such NCDs is taxable in the hands of the investors and you will have to pay tax on the interest income while filing your income tax return. Moreover, as demat account is mandatory to invest in this issue, no TDS would get deducted from your interest income on NCDs held in demat form.

But, in case you decide to close your demat account and keep these NCDs in a physical form, then the company will deduct TDS on the interest payable on the interest payment date. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000.

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.

Application Form of Manappuram 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 Manappuram NCDs, you can contact us at +91-9811797407

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 (STFC) is launching its public issue of non-convertible debentures (NCDs) from the coming Monday, October 15, 2018. This will be the second public issue by the company in the current financial year. The company plans to raise Rs. 1,350 crore from this issue, including the green shoe option of Rs. 1,050 crore.

These NCDs will carry coupon rates in the range of 9.12% to 9.70%, resulting in an effective yield of 9.39% to 9.70% for the retail individual investors. The issue is scheduled to close on October 29, unless the company decides to close it prematurely.

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. 300 crore, with an option to retain oversubscription of an additional Rs. 1,050 crore, making the total issue size to be Rs. 1,350 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 rates would be applicable for annual interest payment and cumulative interest options only. Monthly interest payment option is available only with 5 years and 10 years tenors, and coupon rates for these periods would be 9.12% p.a. and 9.30% p.a. respectively.

0.25% Additional Coupon for Senior Citizens – Like its previous issue, the company has decided to offer an additional coupon of 0.25% p.a. to the senior retail investors, as well as senior HNI investors, who would hold these NCDs on the relevant record date for the purpose of interest payment.

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. 135 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 135 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 540 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 540 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. Moreover, these NCDs will be ‘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). As against 12 working days earlier, these NCDs will get listed on the exchanges within 6 working days after the issue gets closed. Moreover, there is no option of a premature redemption, and the investors would be required to sell these NCDs on either of the stock exchanges in order to encash these NCDs before maturity.

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.

ASBA Mandatory – Like IPOs, SEBI has made ASBA mandatory to apply for debt issues as well effective October 1. So, writing cheques would become history now in applying for these debt instruments.

TDS – Though the interest income would be taxable with these bonds, NCDs taken in demat form will not attract any TDS. The investor will have to pay tax on the interest income while filing his/her income tax return. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000.

Minimum Investment Size – STFC 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 NCDs?

Indian financial markets are in turmoil, and it all started with IL&FS and DHFL, along with high crude prices and a weaker Indian Rupee. In the last nine months or so, most of the investors have lost their hard earned money in almost all the asset classes, be it equity, or debt, or real estate, or gold, or currency (read INR and crypto currencies). Though I consider bank fixed deposits to be one of the most unattractive financial investments, I believe people who invested in bank FDs must have been the happiest of the lot during this same period.

And, at this moment, most of the retail investors are scared of investing their investible surplus in any of the volatile asset classes, and want to keep it in safe havens as much as possible. When ‘AAA’ rated NCDs of companies like DHFL are trading at an yield of 10% or more, then why a person would like to invest in NCDs of a ‘AA+’ rated company at a lower effective yield of 9.40% to 9.70%? Personally, I would not.

But, I still believe that things are not as bad as they seem to be at this moment, and Shriram Transport Finance is a fundamentally sound company with a good management. At the same time, the interest rates offered by a private company in this issue are not attractive enough for me to put my money. So, if you are not liable to pay any tax on your total income or fall in the 10% or 20% tax bracket, or if you are a brave investor with a reasonable confidence on STFC’s business prospects and its management, then only you should invest in these NCDs for the shortest period possible, with either monthly or annual interest payment option.

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

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]

Indiabulls Commercial Credit Limited (ICCL) has launched its public issue of secured redeemable non-convertible debentures (NCDs) from today, September 11, 2018. The issue is rated ‘AAA’ by the rating agencies CRISIL and CARE and will carry an effective annual rate of 9.20% for 10 years, 9% for 5 years, 8.90% for 3 years and 8.80% for 2 years.

The company plans to raise Rs. 2,000 crore from this issue, including a green-shoe option of Rs. 1,000 crore. The issue is scheduled to close on September 28, unless the company decides to foreclose it in case of oversubscription.

As we take a decision to invest in this issue or not, let us first have a look at its salient features.

Size & Objective of the Issue – Base size of the issue is Rs. 1,000 crore and the company will have the right to exercise the green-shoe option to raise an additional Rs. 1,000 crore in case of oversubscription, thus making it a Rs. 2,000 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The company is issuing these NCDs for a period of 2 years, 3 years, 5 years and 10 years. These NCDs will yield you a return of 8.80% to 9.20%, with monthly, annual and cumulative interest payment options. Monthly interest payment option will carry a lower coupon rate as compared to the annual interest payment option. You can check the differential interest rates in the table below.

(Note: Figures are in Rs. Crore, except per share data & percentage figures)

Minimum Investment – Investors need to apply for a minimum of 10 NCDs in this issue with face value Rs. 1,000 each i.e. an investment of Rs. 10,000 at least.

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. 200 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 200 crore

Category III – High Net-Worth Individuals (HNIs) – 40% of the issue i.e. Rs. 800 crore

Category IV – Retail Individual Investors (RIIs) – 40% of the issue i.e. Rs. 800 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 CARE have rated this issue as ‘AAA’ with a ‘Stable’ outlook. Moreover, these NCDs will be ‘Secured’ in nature for all the investment periods, i.e. 2 years, 3 years, 5 years and 10 years.

Listing, Premature Withdrawal Option – These NCDs will get listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 12 working days after the issue gets closed. As there will be no option of a premature redemption, the investors can always sell these bonds on 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.

TDS – Though the interest income would be taxable with these bonds, NCDs held in demat form will not attract any TDS. The investor will have to pay tax on the interest income while filing his/her income tax return.

Financials of Indiabulls Commercial Credit Limited

Indiabulls Commercial Credit has done an excellent job in growing its assets under management (AUM) from a mere Rs. 1,718 crore in FY 2016 to Rs. 8,264 crore in FY 2018, a CAGR of 119.32% and also its profit after tax from Rs. 50.55 in FY 2016 to Rs. 254.90 crore, a CAGR of 124.56%.

Moreover, it has improved on its asset quality as well. From a high of 2.25% of gross NPAs and 1.76% of Net NPAs in FY 2016, the company has been able to reduce both of these numbers to 0.60% and 0.40% respectively in FY 2018.

Should you invest in Indiabulls Commercial Credit Limited NCDs?

As compared to Tata Capital Financial Services, Indiabulls NCDs would yield 0.10% higher on an yearly basis. However, despite its healthy financials, investors would have more confidence in Tata Capital NCDs as compared to Indiabulls. As I expressed my views for the Tata Capital issue, this issue too carries coupon rates which do not attract me as an investor. I consider these coupon rates, offered by a private company, to be below my expectations.

Again, investors who understand mutual funds, should invest in gilt funds or other debt funds as compared to these NCDs with lower yield. However, conservative investors can consider investing in these NCDs, as it is not easy to find many ‘AAA’ rated issues these days offering coupon rates higher than the bank FDs.

Investors, who fall in the lower tax brackets and are looking for relatively safer options to invest their investible surplus, can think of investing in this issue. Again, I think one should go for the shortest possible time period to invest with a private company. So, either a 2-year option, or 3-year option, or 5-year option should be preferred to invest in these NCDs.

Application Form – Indiabulls Commercial Credit 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 Indiabulls NCDs, you can reach us at +91-9811797407

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]

Tata Capital Financial Services Limited (TCFSL) is launching its public issue of secured redeemable non-convertible debentures (NCDs) and unsecured subordinated redeemable NCDs from the coming Monday, September 10, 2018. The issue is rated ‘AAA’ by the rating agencies CRISIL and CARE and will carry an effective annual rate of 9.10% for 10 years, 8.90% for 5 years and 8.80% for 3 years.

The company aims to raise Rs. 7,500 crore from this issue, including a green-shoe option of Rs. 5,500 crore. The issue is scheduled to close on September 21, but in case of oversubscription, the company will have the option to foreclose it.

Before we dig further to find out if the issue is worth investing, let us first check some of the key features of this issue.

Size & Objective of the Issue – Base size of the issue is Rs. 2,000 crore and there is a provision for the company to exercise the green-shoe option to raise an additional Rs. 5,500 crore in case of oversubscription, thus making it a Rs. 7,500 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – As mentioned above, the company is issuing these NCDs for a period of 3 years, 5 years and 10 years. These NCDs will carry coupon rates in the range of 8.80% to 9.10%, with annual interest payment as the only interest payment option.

Unsecured, Subordinated 10-Year Option – NCDs issued for a period of 10 years would yield you 9.10% on an annual basis, but would also be unsecured and subordinated in nature. That would mean the investors of these NCDs will have no or fewer rights to seek compensation by selling certain assets of the company in case it defaults on its regular interest payments and/or principal repayment.  

Minimum Investment – Investors need to apply for a minimum of 10 NCDs in this issue with face value Rs. 1,000 each i.e. an investment of Rs. 10,000 at least.

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 – Institutional Investors – 20% of the issue i.e. Rs. 1,500 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 1,500 crore

Category III – High Net-Worth Individuals (HNIs) – 30% of the issue i.e. Rs. 2,250 crore

Category IV – Retail Individual Investors (RIIs) – 30% of the issue i.e. Rs. 2,250 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 CARE have rated this issue as ‘AAA’ with a ‘Stable’ outlook. Moreover, these NCDs will be ‘Secured’ in nature for a period of 3 and 5 years, and ‘Unsecured’ in nature for 10 years.

Listing, Premature Withdrawal Option – These NCDs will get listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 12 working days after the issue gets closed. As there will be no option of a premature redemption, the investors can always sell these bonds on 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.

TDS – Though the interest income would be taxable with these bonds, NCDs held in demat form will not attract any TDS. The investor will have to pay tax on the interest income while filing his/her income tax return.

Should you invest in Tata Capital Financial Services NCDs?

India has clocked 8.2% GDP growth in the first quarter of the current financial year, and with rising crude prices, 10-year bond yield has again jumped to cross the psychological mark of 8%. So, in a rising bond yield scenario, investors expect banks and companies to offer higher interest rates on their deposits.

However, the company has decided to offer even lower interest rates than offered by the companies in the last six months or so, probably because it has been rated ‘AAA’ by the rating agencies and the brand name of Tata behind it.

I consider these coupon rates offered by a private company to be below my expectations. One can consider investing in gilt funds or other debt funds as compared to these low-yield NCDs. However, conservative investors can consider investing in these NCDs, as it is not easy to find many ‘AAA’ rated issues these days offering coupon rates higher than the bank FDs.

Investors, who fall in the lower tax brackets and are looking for relatively safer options to invest their investible surplus, can think of investing in this issue. Again, I think one should go for the shortest possible time period to invest with a private company. So, either a 3-year option or 5-year option should be chosen to invest in these NCDs.

Application Form – Tata Capital Financial Services 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 Tata Capital NCDs, you can reach us at +91-9811797407

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]

ECL Finance Limited, one of the finance arms of the Edelweiss Group, is launching its public issue of secured and redeemable non-convertible debentures (NCDs) from today, July 24, 2018. The issue will carry an effective annual rate of 9.85% for 10 years, 9.65% for 5 years and 9.45% for 3 years.

The company aims to raise Rs. 2,000 crore from this issue, including a green-shoe option of Rs. 1,500 crore. The issue is scheduled to close on August 16, but in case of oversubscription, the company will have the option to foreclose it.

So, before we take a decision whether to invest in this issue or not, let us first check its salient features.

Size & Objective of the Issue – Base size of the issue is Rs. 500 crore and total issue size is Rs. 2,000 crore including the green shoe option of Rs. 1,500 crore. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – As mentioned above, the company is issuing these NCDs for a period of 3 years, 5 years and 10 years. Moreover, these NCDs will carry coupon rates in the range of 9.25% to 9.85% with monthly, annual and cumulative interest payment options.

There is a floating interest rate option as well, in which the interest rate will be reset on a periodic basis as per MIBOR. The company has decided to offer a spread of 2.50% over MIBOR with this option and the rate will be reset on an annual basis.

Minimum Investment – Investors need to apply for a minimum of 10 NCDs in this issue with face value Rs. 1,000 each i.e. an investment of Rs. 10,000 at least.

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 – Institutional Investors – 20% of the issue i.e. Rs. 400 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 400 crore

Category III – High Net-Worth Individuals (HNIs) – 30% of the issue i.e. Rs. 600 crore

Category IV – Retail Individual Investors (RIIs) – 30% of the issue 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.

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 ICRA have rated this issue as ‘AA’ with a ‘Stable’ outlook. Moreover, these NCDs will be ‘Secured’ in nature.

Listing, Premature Withdrawal Option – These NCDs will get listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 12 working days after the issue gets closed. As there will be no option of a premature redemption, the investors can always sell these bonds on 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.

TDS – Though the interest income would be taxable with these bonds, NCDs taken in demat form will not attract any TDS. The investor will have to pay tax on the interest income while filing his/her income tax return. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000.

Should you invest in ECL Finance NCDs?

During 2013-14 and 2014-15, ECL Finance came out with three of its NCD issues offering 12.52% p.a. for 60 months, 12.68% p.a. for 70 months and 10.64% p.a. for 60 months. But, those were times of high interest rates and it seems the scenario has changed somehow. Corporate issuers are not offering high rate of interest now and that is a new normal these days.

As none of the issuers in the recent times has offered 9.85% coupon, this issue by far is carrying the highest coupon rate. In March 2018, Edelweiss Retail Finance in its public issue of NCDs offered 9.25% for 10 years, 9% for 5 years and 8.75% for 3 years. So, ECL Finance is offering attractive interest rates relatively.

But, then this issue is rated ‘AA’, lower than all the previous issues of the recent times. Edelweiss Retail Finance issue was also rated ‘AA’ Stable by CRISIL and ICRA. So, the conservative investors, who go by credit ratings of such issues, might prefer to avoid this issue and wait for a higher rated issue. You also need to make a decision whether you want to have a relatively higher rate of interest with a slightly lower credit rating, or just skip it and wait for a better issue.

Investors, who fall in lower tax brackets and are looking for relatively higher interest rates to deploy their investible surplus, can think of investing in this issue. However, even if you decide to invest in this issue, I would advise you to go for a shorter possible duration and monthly interest payment option.

Application Form – ECL 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 ECL Finance NCDs, you can reach us at +91-9811797407