Edelweiss’ ECL Finance 9.85% NCDs – July 2018 Issue

by Shiv Kukreja on July 24, 2018

in 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 shivskukreja@gmail.com

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.

picture1

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

{ 27 comments… read them below or add one }

S.K. July 24, 2018 at 8:57 AM

Mr. Shiv, Thank you. May I request you to kindly provide such valuable investment reviews/information, as early as possible, so that we can make arrangements for funds. If the information comes on the day of Issue Opening itself as in most cases & if the issue is oversubscribed early/same day, then investors lose out on the opportunity.
Thank you for your very valuable inputs as always

Reply

Shiv Kukreja July 24, 2018 at 6:12 PM

Thanks S.K.!
I do try to post it as soon as possible, but somehow it always gets delayed. I’ll try to find out ways to improve on it.

Reply

Bobby July 24, 2018 at 10:53 AM

Many Thanks Shiv for the valuable guidance. Linked to the default risk, is there a list somewhere which shows how many NCDs have really defaulted historically — with other additional data like were the assets of defaulted company sold to pay back NCD holders etc..

Reply

Shiv Kukreja July 24, 2018 at 6:16 PM

Hi Bobby,
Haven’t really found any such source of information. But, I think it must be there somewhere on the RBI’s or SEBI’s website. I’ll try to find out and share it here if I get it.

Reply

Nitesh July 24, 2018 at 4:42 PM

today’s subscription figures please

Reply

Bobby July 24, 2018 at 5:29 PM

Here’s the data as of Jul 24 2018 1700 Hrs

Base Issue Size 500 Cr.
Oversubscription Option Size 1500 Cr.
Total Issue Size (Base + Oversubscription) 2000 Cr.
BSE + NSE Subscriptions till 1700 Hrs 24Jul18 1638.29 Cr.
Subscriptions relative to Base Issue Size 3.27 times
Subscriptions relative to Total Issue Size 0.81 times

Reply

Shiv Kukreja July 24, 2018 at 6:27 PM

Thanks Bobby!

Reply

Shiv Kukreja July 24, 2018 at 6:25 PM

Day 1 (July 24) Subscription Figures:

Category I – Rs. 326.14 crore as against Rs. 400 crore reserved – 0.82 times
Category II – Rs. 10.46 crore as against Rs. 400 crore reserved – 0.03 times
Category III – Rs. 1,034.30 crore as against Rs. 600 crore reserved – 1.72 times
Category IV – Rs. 269.25 crore as against Rs. Rs. 600 crore reserved – 0.45 times
Total Subscription – Rs. 1,640.25 crore as against total issue size of Rs. 2,000 crore – 0.82 times

Reply

Shiv Kukreja July 24, 2018 at 6:26 PM

The issue is expected to get closed by tomorrow.

Reply

Niraj Jain July 25, 2018 at 11:56 AM

You always write about the financials as well. Whats the matter with this one?

Reply

Nitesh July 25, 2018 at 5:09 PM

today’s subscription fi
gures please

Reply

Nitesh July 26, 2018 at 5:53 PM

latest subscription figures please

Reply

Shiv Kukreja July 26, 2018 at 10:48 PM

Day 3 (July 26) Subscription Figures:

Category I – Rs. 351.82 crore as against Rs. 400 crore reserved – 0.88 times
Category II – Rs. 79.55 crore as against Rs. 400 crore reserved – 0.20 times
Category III – Rs. 1,093.67 crore as against Rs. 600 crore reserved – 1.82 times
Category IV – Rs. 478.41 crore as against Rs. Rs. 600 crore reserved – 0.80 times
Total Subscription – Rs. 2,003.45 crore as against total issue size of Rs. 2,000 crore – 1.00 times

Reply

Shiv Kukreja July 26, 2018 at 10:48 PM

The issue stands closed today, July 26.

Reply

A K Mishra July 29, 2018 at 6:37 AM

Is it safe to invest in Ecl-ncd.

Reply

Ashok daga July 29, 2018 at 9:06 AM

I like to invest in NCD. Pl advise NCD where I can invest

Reply

Ashok daga July 29, 2018 at 9:07 AM

I like to invest in NCD. Pl advise

Reply

Naveen July 29, 2018 at 10:32 PM

Hi Shiv
I bought JM Financial NCD in monthly interest payout category but still haven’t received any interest on my NCDs, it was allotted in the month of June 2018. In this case whom should I reach out to. I sent a mail to support@karvy.com, no response from them.

Reply

Bobby August 5, 2018 at 11:15 PM

Naveen Jee – As per the prospectus of these NCDs, the email ID for registrar is einward.ris@karvy.com.

You can write to above email ID with cc to JMFL team’s investor relations (IR) team at :

investorrelations.csl@jmfl.com
grievance.ibd@jmfl.com

I have contacted Karvy at above email ID for interest payment issues with HUDCO & they did respond after 1 reminder. Also for a complex case, they looped in HUDCO’s IR email ID. That’s why I requested you to loop in JMFL IR on above IDs so they can patch in when needed.

Reply

Prajju July 30, 2018 at 7:05 AM

Hi Shiv, any new NCD expected and date?

Thanks
Prajju

Reply

abhinav July 31, 2018 at 12:41 PM

pls tell the listing date

Reply

SUJOY August 1, 2018 at 1:05 PM

Dear Mr Kukreja,
Do you offer Financial Planning Service to individual against fees?
In case yes, I am interested. Pl. inform.

Reply

Mr. Dipta Mukherjee August 2, 2018 at 12:51 PM

Your advice related to ECL Finance NCD is best. Related to information regarding the said NCD is Very good because date of listing and outlook regarding recommendation.

Reply

srichand talreja August 2, 2018 at 2:22 PM

dear mr. kukreja,is the issue still open? regards talreja

Reply

nitesh August 6, 2018 at 8:46 PM

got full allotment and also received interest in my account please provide nse bse script code of ecl ncd 2018

Reply

COL VINEET DEV August 21, 2018 at 6:30 PM

I need a littl hlp. I had applied for this NCD on 26 Jul 18 through Sharekhan. I have not received any allocation nor has the money been returned to me. Whom should I contact?

Reply

HL Jindal September 7, 2018 at 2:27 PM

Kukrejaji u have given good advice.I have preferred to invest in AAA rated co like TATA

Reply

Leave a Comment

Previous post:

Next post: