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 skukreja@investitude.co.in

Shriram Transport Finance Company Limited (STFC) is launching its public issue of non-convertible debentures (NCDs) from today, June 27, 2018. This will be the first public issue by the company after a gap of four years. The company plans to raise Rs. 5,000 crore from this issue, including the green shoe option of Rs. 4,000 crore.

These NCDs will carry coupon rates in the range of 9.03% to 9.50%, resulting in an effective yield of 9.19% to 9.51% for the retail individual investors. The issue is scheduled to close on July 20, 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. 1,000 crore, with an option to retain oversubscription of an additional Rs. 4,000 crore, making the total issue size to be Rs. 5,000 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 9.50% p.a. for a period of 10 years, 9.40% p.a. for 5 years and 9.20% p.a. for 3 years. These rates would be applicable for annual interest payment only. Monthly interest payment option is available only with 5 years and 10 years tenors, and coupon rates for these periods would be 9.03% p.a. and 9.13% p.a. Respectively.

0.25% Additional Coupon for Senior Citizens – The company has decided to offer an additional coupon of 0.25% p.a. to the retail investors, as well as HNI investors, who 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. 500 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 500 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 2,000 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 2,000 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). 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 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.

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?

Shriram Transport Finance issued its NCDs in a public issue four years ago in 2014 at an effective yield of 11% to 11.50%. During that time, inflation was still high, but bond yields and interest rates had just started their downward journey. Now, these NCDs are offering an effective yield of 9.19% to 9.51%. So, if we compare NCDs of the same issuer with its previous issues, there is a material downward shift that has happened. But, if we compare other companies’ coupon rates from their latest issues with that of STFC’s coupon rates, STFC scores over other issuers.

Moreover, STFC is a fundamentally sound company with a long track record of strong income and earnings growth. It also carries a credit rating of ‘AA+’ with a ‘Stable’ outlook. All these factors augur well for this issue and as interest rates on bank FDs are still ruling lower, this issue gives risk-averse investors an opportunity to invest their surplus money into high yielding NCDs.

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 these 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 skukreja@investitude.co.in

JM Financial Credit Solutions Limited, a venture between JM Financial Limited holding 50.01% and INH Mauritius holding 48.62%, is going to launch its issue of Non-Convertible Debentures (NCDs) from the coming Monday i.e. May 28, 2018. The company plans to raise Rs. 750 crore from this issue, including the green shoe option of Rs. 450 crore.

These NCDs will carry coupon rates in the range of 9.11% to 9.75%, resulting in an effective yield of 9.24% to 9.74% for the retail individual investors. The issue is scheduled to close on June 20, 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. 300 crore, with an option to retain oversubscription of an additional Rs. 450 crore, making the total issue size to be Rs. 750 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 9.25% p.a. for a period of 38 months, 9.50% p.a. for 60 months and 9.75% p.a. for 120 months. These rates are applicable for annual interest payment only. Monthly interest payment option is available only with 60 months and 120 months tenors, and coupon rates for these periods have been fixed at 9.11% p.a. and 9.34% p.a. 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) – 20% of the issue i.e. Rs. 150 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 150 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 225 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 225 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 – ICRA 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 will get listed only on both 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 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 JM Financial Credit Solutions NCDs?

JM Financial Credit Solutions Limited is a relatively new company with a strong promoter background. The company reported revenues of Rs. 103.73 crore during FY 2014-15, Rs. 788.36 crore in FY 2016-17 and Rs. 959.93 crore in FY 2017-18. Profit after tax (PAT) of the company has grown from Rs. 48.80 crore in FY 2014-15 to Rs. 277.25 crore in FY 2016-17 and Rs. 328.29 crore in FY 2017-18.

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

Loan Book as on March 31, 2018

The company has been able to grow its loan book from Rs. 1,844 crore in FY 2014-15 to Rs. 5,658 crore in FY 2016-17 and Rs. 7,339 crore in FY 2017-18. As mentioned in the table below, 50.2% of its loan book is of project finance, 17.3% loan against property, 8.7% loan against shares, 8.9% project at early stage loans, 13.2% loans against land and 1.7% unsecured loans.

This issue has been rated ‘AA’ as compared to DHFL’s issue which is rated ‘AAA’. That is because DHFL is a much larger and stable company with a long history of being a loan financier as compared to JM Financial Credit Solutions. There is a coupon rate differential of just 0.50% p.a. for 5 years and 0.65% p.a. for 10 years. So, if somebody trusts the the JM Financial group and its management and wants to reap the benefits of its growth story going forward, then I think investing in its shares would be a better option rather than investing in its subsidiary’s NCDs.

Risk-averse and tax-exempt investors, however, can consider investing in these NCDs for a period of 38 months or 60 months, preferably with monthly or annual interest payment option.  

Application Form of JM Financial Credit Solutions NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. To invest in these NCDs, bidding of your application form or any further info, you may 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 skukreja@investitude.co.in

DHFL, or Dewan Housing Finance Limited, is coming out with its issue of Non-Convertible Debentures (NCDs) from the coming Tuesday i.e. May 22, 2018. These NCDs will carry coupon rates in the range of 8.56% to 9.10%, resulting in an effective yield of 8.90% to 9.10% for the retail individual investors.

DHFL plans to raise Rs. 12,000 crore from this issue, including the green shoe option of Rs. 9,000 crore. The issue will remain open for 2 weeks and is scheduled to close on June 4, 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. 3,000 crore, with an option to retain oversubscription of an additional Rs. 9,000 crore, making the total issue size to be Rs. 12,000 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.

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) – 25% of the issue i.e. Rs. 3,000 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 1,200 crore

Category III – High Net Worth Individuals (HNIs) investing more than Rs. 10 lakh, including HUFs – 30% of the issue is reserved i.e. Rs. 3,600 crore

Category IV – Resident Indian Individuals investing up to Rs. 10 lakh, including HUFs – 35% of the issue is reserved i.e. Rs. 4,200 crore

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 8.90% p.a. for a period of 3 years, 9% p.a. for 5 years and 7 years and 9.10% p.a. for 10 years. These rates are applicable for annual interest rate payment only. Monthly interest payment option is available only with 3 years and 5 years tenors, and coupon rates for these periods have been fixed at 8.56% p.a. and 8.65% p.a. respectively.

Additional 0.10% Coupon for Senior Citizens – Category III and Category IV investors, who are senior citizens on the deemed date of allotment, will be eligible for an additional 0.10% interest rate provided they hold these NCDs on the record date for the purpose of interest payment.

One-Time Additional Incentive on Maturity – Category III and Category IV initial allottees will be paid a one-time additional incentive of 0.50% for the 5-year annual as well monthly interest payment options, 0.70% for the 7-year option and 1% for the 10-year option. This incentive will be paid at the time of maturity and only to those investors who hold these NCDs throughout their respective duration. No such incentive will be paid with the 3-year interest payment options.

MIBOR Linked Floating Interest Rate – Like its previous issue, DHFL has decided to offer an option to have floating interest rate with these NCDs. The specified spread will be 2.16% p.a. over and above the benchmark MIBOR for all the categories of investors. Benchmark MIBOR will be computed on an annualized basis, based on the Reference Overnight MIBOR published by Financial Benchmark India Pvt. Ltd. (FBIL), and it will be reset once every year in the second and third year.

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

Listing, Premature Withdrawal & Put/Call Option – These NCDs will get listed on both the national 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. Though there is no option of a premature redemption, the investors can always sell these NCDs on the stock exchanges. There is no option either with the company to ‘Call’ these NCDs prematurely.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors will have the option to apply for these NCDs in physical or certificate form as well.

TDS – Though the interest income would be taxable with these bonds, NCDs taken in a 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 DHFL NCDs?

Bond yields have been rising for the last 12-18 months, and that too, at an unusually fast speed. Benchmark 10-year government bond yield is currently trading very close to 7.90% levels, while it touched a low of around 6.10% during demonetization period.

In August 2016, when the bond yields were trading between 6.70% to 7%, DHFL issued its NCDs with coupon rates ranging between 8.83% to 9.30% and the issue got oversubscribed to the tune of 4.70 times on the first day itself. Encouraged by such an extraordinary response, DHFL came out with its second tranche of a bigger size a few days later, and that too got oversubscribed 1.26 times on Day 1.

Going by that experience, I think this issue should also get oversubscribed much before its official closing date. But, despite of the fact that the bond yields have risen by around 2% since demonetization, it is somewhat disappointing to have coupon rates on offer even lower than its August 2016 issues.

The current NDA government is about to complete its 4-year term and I expect both equity markets as well as bond markets to exhibit a lot of volatility in the next 1-2 years. Given such a scenario, I think it is time the passive or risk-averse investors should park their money in safer investment instruments. These NCDs too are relatively safer carrying ‘AAA’ rating, except for the fact that DHFL is a private issuer.

Coupon rates of 8.56% to 9.10% do not attract me much, despite the issue being rated ‘AAA’. I would rather prefer to invest in debt mutual funds, hoping bond yields to fall once the economy stabilizes post next year’s elections. However, investors, who are not required to pay any tax on their annual taxable income or who fall in the 10% tax bracket, can consider investing in these NCDs for a period of 3 years or max 5 years. As expressed earlier as well, I personally avoid longer term investment periods with private companies, so would advise my clients to avoid longer period investments in such NCDs.

Application Form of DHFL NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. To invest in these NCDs, bidding of your application form or any further info, you may contact us at +919811797407

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 skukreja@investitude.co.in

After SREI Infrastructure Finance, Edelweiss Retail Finance and Muthoot Finance, SREI Equipment Finance has decided to launch its issue of non-convertible debentures (NCDs). The issue will open for subscription from April 25th and carry interest rates in the range of 8.50% to 9.60% per annum. These NCDs will be issued for a period of 400 days, 3 years, 5 years and 10 years.

The company plans to raise Rs. 1,000 crore from this issue, including the green-shoe option of Rs. 500 crore. These NCDs have been rated ‘AA+’ by Brickwork Ratings and SMERA and are ‘Secured’ in nature. The issue is scheduled to close on May 16, but it is highly unlikely that it will remain unsusbcribed till then.

Before we decide whether to invest in this issue or not, let us quickly check some of its salient features:

Size & Objective of the Issue – Base size of this issue is Rs. 500 crore, with a green-shoe option to retain an additional Rs. 500 crore, thus making it a Rs. 1,000 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to refinance its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry a coupon rate of 8.75% p.a. payable on a monthly basis, 9.10% p.a. payable annually and on a cumulative basis for a period of 3 years. For 5 years, these rates stand at 9% payable monthly and 9.35% for annual and cumulative options. The rates on offer are the highest for 10 years – 9.20% payable monthly and 9.60% payable annually or on a cumulative basis.

As you can check from the table below, these rates are effectively higher than all the issues that came in the last 2-3 months.

For Category I and Category II investors also, these NCDs carry the same rate of interest as it is for Category III investors.

No Additional Coupon for Shareholders, NCD Holders, Senior Citizens or Employees – Unlike its previous issue, the company has decided not to offer any additional coupon to the shareholders or NCD holders or the employees of the company or its parent company, and senior investors as well.

Minimum Investment – Investors are required to subscribe to at least ten units of these NCDs, thus making it a minimum investment of Rs. 10,000.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three 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. 200 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 200 crore

Category III – Individuals Investors & HUFs – 60% of the issue i.e. Rs. 600 crore

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 the issue 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 – Rating agencies, Brickwork Ratings (BWR) and SMERA have rated this issue as ‘AA+’ with a ‘Stable ‘ outlook. Debt instruments with such a rating are considered to have a high degree of safety regarding timely payment of interest and principal.

Secured NCDs – Unlike its previous issue which offered ‘Unsecured’ NCDs, this issue carries NCDs which are ‘Secured’ in nature i.e. in case of any default on its payment of interest or principal, the bondholders will have the right on certain assets of the company.

Listing, Premature Withdrawal & Put Option – These NCDs will get listed only on the Bombay Stock Exchange (BSE) and the listing will take place within 12 working days from the issue closure date.

Demat Mandatory except Series IV, Series VII and Series X NCDs – Investors need to have a demat account to apply for these NCDs, except Series IV, Series VII and Series X. Notably, these NCDs will pay interest rates on an annual basis.

TDS – Interest income earned on these NCDs is taxable and the investors are required to pay tax on it as per the respective tax slabs they fall in. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000. NCDs held in demat mode will not attract any TDS.

Should you invest in SREI Equipment Finance NCDs?

Financials of the company have improved over the past 12-24 months. The company reported profit after tax (PAT) of Rs. 181.98 crore for the nine-month period ended December 31, 2017, which is higher than its financial year 2016-17 profit of Rs. 148.84 crore. Net interest margin (NIM) as well as net profit margin, both have seen a healthy growth during this period. On the asset quality front too, the company has done well to consistently contain its gross NPAs and Net NPAs. Gross NPAs have fallen from 4.97% in 2014 to 1.99% in 2017. Net NPAs too have fallen from 4.07% to 1.39% in the same period.

Financials of SREI Equipment Finance Limited

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

These NCDs are not for everybody. Risk-averse investors and those who fall in the 30% or 20% tax bracket should avoid investing in them. Also, I think 10 years is a long period to invest with a private company. Investors, with an appetite of taking some risk and who fall in the lower tax brackets, can consider investing in these NCDs for a period of 400 days, 3 years or 5 years. You should consider subscribing for the 10-year option only if you have full faith in the company’s future prospects and also, if you think that the interest rates are going to fall going forward.

Out of the eleven options available, I would personally prefer Series VII, the 5-year annual interest payment option, as I would like the interest to get reinvested at 9% on a monthly basis and credited to my bank account at least once in a year.

Application Form – SREI Equipment 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 SREI Equipment Finance NCDs, you can reach us on +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 skukreja@investitude.co.in

Muthoot Finance is launching its issue of non-convertible debentures (NCDs) in the new financial year starting April 9, 2018. The company plans to raise Rs. 500 crore from this issue, with an option to retain oversubscription to the tune of Rs. 3,000 crore. These NCDs will carry coupon rates between 8% for 400 days and 9% for 60 months. Maturity period will range between 400 days to 60 months, having monthly, annually and cumulative interest payment options. The issue will remain open for a month and is scheduled to close on May 8, 2018.

Here are the salient features of the issue you should consider before taking a decision to invest or not:

Size of the issue – Base size of the issue is Rs. 500 crore and Muthoot will have the option to retain oversubscription to the tune of Rs. 3,000 crore, including the green-shoe option of Rs. 2,500 crore.

Minimum Investment – Investors are required to apply for a minimum of ten bonds of Rs. 1,000 face value i.e. an investment of at least Rs. 10,000.

Coupon Rates – Muthoot has decided to offer interest rates similar to what it offered last year in April 2017. These NCDs will carry coupon rates in the range of 8% for 400 days to 9% for 60 months. All these NCDs will be ‘Secured’ in nature.

Double your Money Option Missing – Muthoot used to offer an option to double your money in 8 years (or 96 months). This option was there last year as well, but it was ‘Unsecured’ in nature. However, there is no such option this year.

An effective yield of 9.06% p.a. results in doubling your money in 8 years. So, having an option of 9% for 5 years and then reinvesting the proceeds for another 3 years at approximately 9.25% would help you double your investment amount. But, you will have to consider tax effects on the interest payments.

You can check the rates offered for different maturities and different payment options from the table below:

Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have certain percentage fixed for the allotment:

Category I – Qualified Institutional Buyers (QIBs) – 20% of the issue is reserved i.e. Rs. 600 crore

Category II – Non-Institutional Investors & Corporates – 20% of the issue is reserved i.e. Rs. 600 crore

Category III – High Net Worth Individuals (HNIs) & HUFs investing more than Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 900 crore

Category IV – Retail Individual Investors, including HUFs investing up to Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 900 crore

Allotment on First-Come First-Served Basis –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.

NRI/QFI Investments – Non-Resident Indians (NRIs), foreign nationals and Qualified Foreign Investors (QFIs) among others are not allowed to invest in this issue.

Ratings & Nature of NCDs – CRISIL and ICRA, the two rating agencies involved in this issue, have assigned ‘AA/Stable’ rating to the issue, indicating the issue to be safe as far as timely payments of interest and principal investments are concerned. As mentioned above as well, all these NCDs are ‘Secured’ in nature.

Demat Account Mandatory – Muthoot has decided to issue these NCDs compulsorily in demat form. So, if you don’t have a demat account, you won’t be able to apply for these NCDs.

Taxability & TDS – Interest earned on these NCDs will be taxable as per the tax slab of the investor. However, as these NCDs will be allotted compulsorily in your demat accounts, no TDS will be deducted from your interest income.

Listing on BSE – Muthoot has decided to get its NCDs listed only on the Bombay Stock Exchange (BSE). Allotment as well as listing of these NCDs will happen within 12 working days from the closing date of the issue.

Should you invest in Muthoot Finance NCDs?

Despite of the fact that the bond yields have jumped by close to 1.5% in the last one and a half years, no company is willing to raise interest rates on their NCDs. In April 2017, when bond yields were far lower than their current levels, Muthoot offered interest rates in a similar range. SREI Infrastructure Finance and Edelweiss Retail Finance, both raised money in the previous quarter by issuing their NCDs and offered interest rates close to what Muthoot is offering in this issue.

I think Muthoot, SREI Infra Finance and Edelweiss Retail Finance, all should have offered higher interest rates. But, as long as banks are not willing to raise interest rates on their fixed deposits, these finance companies have the liberty to take this opportunity of raising money at such lower rates.

To me, these interest rates are not attractive. I would rather invest my money in debt funds or stocks of fundamentally sound companies for long term or bank FDs of shorter duration.

Application Forms – Muthoot 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 Muthoot 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 skukreja@investitude.co.in

Edelweiss Retail Finance Limited, a company acquired by Edelcap Securities in 2012, is launching its public issue of secured and redeemable non-convertible debentures (NCDs) from the coming Wednesday, March 7. The issue will offer an effective yield of 9.25% for 10 years, 9% for 5 years and 8.75% for a period of 3 years from deemed date of allotment with monthly and annual interest payment options. The issue is scheduled to remain open till March 22, unless the company decides to close it prematurely due to oversubscription or due to any other reason mentioned in its offer document.

Size & Objective of the Issue – Edelweiss Retail plans to raise Rs. 500 crore from this issue, including the green shoe option of Rs. 250 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 – The company has decided to issue its NCDs for a duration of 3 years, 5 years and 10 years. For 3 years, the company is offering 8.75% p.a. payable annually and 8.42% p.a. payable monthly. For 5 years, the coupon rates are 8.65% p.a. and 9% p.a. and for 10 years, these rates are 8.88% p.a. and 9.25% p.a. respectively.

Minimum Investment – Investors need to apply for a minimum of ten bonds of Rs. 1,000 face value in this issue 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. 100 crore

Category II – Non-Institutional Investors – 10% of the issue i.e. Rs. 50 crore

Category III – High Networth Individuals (HNIs) – 20% of the issue i.e. Rs. 100 crore

Category IV – Retail Individual Investors & HUFs – 50% of the issue i.e. Rs. 250 crore

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. As mentioned above, these NCDs will be ‘Secured’ in nature.

Listing, Premature Withdrawal & Put/Call 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. Though there is no option of a premature redemption, the investors can always sell these bonds on the exchanges. The company too does not have the option to ‘Call’ these NCDs during the tenure of these NCDs for which they are issued.

Demat & TDS – Demat account is not mandatory to invest in these bonds as the investors have the option to apply these NCDs in physical form as well. Also, though the interest income would be taxable with these bonds, NCDs taken in demat form will not attract any TDS.

Financials of Edelweiss Retail Finance Limited

(Note: Figures are in Rs. Crore, except percentage figures & Debt to Equity Ratio)

Should you invest in Edelweiss Retail Finance NCDs?

Like I expressed my views about SREI Infrastructure Finance NCDs last week, for this issue too, I think the interest rates on offer fall at least 50 basis points (or 0.50% p.a.) short of my expectations. Despite of the fact that the interest rates this issue is carrying are still higher than almost all of the bank fixed deposits, these rates are not attractive enough for me to put my money in these NCDs. In a rising interest rate scenario, these companies should have offered higher rates in order to compensate higher risk they carry and also to make up for higher expected rates in future.

But, in the absence of a better alternate investment option, where should we invest our money? If you think that the worst of demonetisation and GST implementation is behind us and our macroeconomic numbers will improve from hereon, then probably it is time that we should move our money to either medium-term debt funds or long-term gilt funds. However, if you have a view that our economic recovery is still somewhat far from the desired levels, then it would be better to stay invested in short term funds, liquid funds or bank FDs.

However, investors, with an appetite to absorb somewhat higher risk and who have a view that the bond yields have peaked in the short term, can consider investing in this issue, but only for 3 years or 5 years. Investing for 10 years with a private issuer should be best avoided.

Application Form – Edelweiss Retail 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 Edelweiss Retail Finance 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 skukreja@investitude.co.in

Low interest rates on bank FDs and post office small saving schemes has resulted in investors searching for higher yield fixed income options, including short term debt funds. One such investment option is available right now in the form of non-convertible debentures (NCDs) from SREI Infrastructure Finance Limited.

The issue opened on February 9, 2018 and is carrying a maximum of 9.50% per annum coupon rate. It will remain open for two more weeks to close on March 7, 2018. These NCDs are offering monthly, annually and cumulative interest payment options.

As we analyse it further, let us take a quick look at the salient features of this issue.

Size & Objective of the Issue – Base size of this issue is Rs. 200 crore, with a green-shoe option to retain an additional Rs. 1,800 crore, 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 issue will carry a coupon rate of 9.50% p.a. payable on an annual or cumulative basis for a period of 10 years, 9% p.a. for a period of 5 years, 8.75% for 3 years and 8.50% for 400 days. For investors seeking regular income, monthly interest payment option is also available for a period of 3, 5 and 10 years. Though coupon rates will be lower with the monthly interest payment options, effective rates will be close to the coupon rates of annual interest payment options.

0.25% Additional Coupon for SREI Infra Shareholders, NCD Holders, Senior Citizens & Employees – Existing shareholders and NCD holders of SREI Infra, senior citizens aged more than 60 years of age and the employees of SREI Infra will be offered an additional coupon of 0.25% per annum. Record date for the payment of interest will be considered as the relevant date for these investors to be eligible for this additional rate of interest.

Minimum Investment – Investors are required to make a minimum investment of Rs. 10,000 i.e. ten NCDs of face value Rs. 1,000 each.

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 – 10% of the issue i.e. Rs. 200 crore

Category III – Individual & HUF Investors – 60% of the issue i.e. Rs. 1,200 crore

Category IV – Trusts & Society Investors – 10% of the issue i.e. Rs. 200 crore

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 – Rating agency Brickwork Ratings (BWR) has rated this issue as ‘AA+’. Debt instruments with such a rating are considered to have high degree of safety regarding timely payment of interest and principal. NCDs issued for 400 days, 3 years and 5 years are ‘Secured’ in nature and in case of any default on its payment of interest or principal, the bondholders will have the right on certain secured assets of SREI Infra. However, NCDs issued for 10 years are ‘Unsecured’ in nature.

Listing, Premature Withdrawal & Put/Call Option – These NCDs will be 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. Though there is no option of a premature redemption, the investors can sell these bonds on the stock exchanges.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors will have the option to apply for these NCDs in physical or certificate form as well.

TDS – Interest income earned is taxable with these NCDs and the investors are required to pay tax on the interest income as per their respective tax slabs. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000. NCDs held in demat mode will not attract any TDS.

Should you invest in SREI Infrastructure Finance NCDs?

Post the implementation of GST in July 2017, the government has reduced its rates from 28% to 18%, from 18% to 12% and from 12% to 5% on many of the items. Probably that is one of the primary reasons why GST tax collection has been below the government’s own estimates. Such shortfall in tax collection and lower than expected economic growth has put a lot of pressure on the government’s finances and thus resulted in a spike in bond yields. The benchmark 10-year G-Sec yield has jumped to 7.91% from a low of 6.1-6.2% post demonetisation.

In such a scenario, I would have liked SREI Infra to offer somewhat higher rate of interest in this issue. SREI Infra’s subsidiary, SREI Equipment Finance in its July issue offered relatively attractive rate of interest. Since then, bond yields have risen by at least 75 basis points. So, SREI Infra offering relatively lower rate of interest in a rising bond yield scenario has left me somewhat disappointed as an investor.

But, even the fixed deposit rates have been ruling at lower than satisfactory levels. In such a scenario, one should either wait for some other company to come out with its NCDs issue carrying relatively attractive rate of interest, or deploy money in short term deposits or short-term debt mutual funds. However, investors who do not want to wait for some other issue to invest their surplus money can consider investing in this issue.

Application Form – SREI Infra 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 SREI Infra 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 skukreja@investitude.co.in

SREI Equipment Finance 9.92% Non-Convertible Debentures (NCDs) – July 2017 Issue Details 

Infrastructure finance space has been facing a really difficult time over the past few years. But, off late it has been recovering well for the company and it has been able to improve on its asset quality front. The company has been able to contain its gross NPAs from 4.97% in FY14 to 2.48% in FY17 and net NPAs from 4.07% to 1.76% in the same period. However, this improvement has come at the cost of a slowdown in its revenue growth and net interest income.

Worst is probably not over for the company. But going ahead, with an expected improvement in the economy and the infrastructure space, the company is likely to do better and grow at a relatively higher speed.

Financials of SREI Equipment Finance Limited

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

Investors, with an appetite of taking some risk and who fall in the lower tax brackets, can consider investing in these NCDs. But, as the investment period is long, the investors would do well to be vigilant about the company’s asset quality and loan growth going forward.

In a falling interest rate scenario, 9.92% effective yield is quite attractive. But then 10 years is a long period to invest with a private company. Out of the nine options available, I would personally prefer Series I, with monthly interest payment option, as I would like to get back my principal investment amount and the interest thereon with a private company as early as possible.

Application Form – SREI Equipment 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 SREI Equipment Finance NCDs, you can reach us on +91-9811797407

SREI Equipment Finance is coming up with its issue of non-convertible debentures (NCDs) from this Monday i.e. July 17th. The company is offering interest rates in the range of 9.25% to 9.55% per annum, which effectively fall between 9.30% to 9.92%. These NCDs will be issued for a period of 5 years & 3 months, 7 years and 10 years.

These NCDs have been rated ‘AA+’ by Brickwork Ratings and SMERA and would also carry a tag of ‘Unsecured’ as far as the rights of its investors’ are concerned. Though the issue is scheduled to close on 31st of July, but given it carries such attractive interest rates in a falling interest rate scenario, it is highly unlikely that the issue would remain unsubscribed till then.

Let us quickly check some of the salient features of this issue:

Size & Objective of the Issue – Base size of this issue is Rs. 500 crore, with a green-shoe option to retain an additional Rs. 500 crore, thus making it a Rs. 1,000 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to refinance its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry a coupon rate of 9.25% p.a. payable on a monthly basis, 9.30% p.a. payable annually and on a cumulative basis for a period of 5 years & 3 months. For 7 years maturity period, these rates would be 9.35% payable monthly and 9.40% for annual and cumulative options. The rates on offer are the highest for 10 years – 9.50% payable monthly or 9.55% payable annually or on a cumulative basis.

As you can check from the table below, these rates are effectively higher by 1.54% p.a. than the rates offered by Mahindra Finance in its ongoing issue.

For Category I and Category II investors also, these NCDs carry the same rate of interest as it is for Category III investors.

0.15% Additional Coupon for SREI Equipment Finance & SREI Infra Shareholders, NCD Holders, Senior Citizens & Employees – Existing shareholders and NCD holders of SREI Equipment Finance, SREI Infra, senior citizens aged more than 60 years of age and the employees of the company and SREI Infra will be offered an additional coupon of 0.15% per annum. Deemed date of allotment will be considered as the relevant date for these investors to be eligible for this additional rate of interest.

Minimum Investment – Investors are required to subscribe to at least ten units of these NCDs, thus making it a minimum investment of Rs. 10,000.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and each category will have the below mentioned percentage fixed in the allotment:

Category I – Institutional Investors – 30% of the issue i.e. Rs. 300 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 200 crore

Category III – Individuals Investors & HUFs – 50% of the issue i.e. Rs. 500 crore

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 the issue 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 – Rating agencies, Brickwork Ratings (BWR) and SMERA have rated this issue as ‘AA+’ with a ‘Stable ‘ outlook. Debt instruments with such a rating are considered to have a high degree of safety regarding timely payment of interest and principal.

Unsecured NCDs – These NCDs are ‘Unsecured’ in nature i.e. in case of any default on its payment of interest or principal, the bondholders will not have any right on any of the assets of SREI Equipment Finance.

Listing, Premature Withdrawal & Put Option – These NCDs will get listed on both the stock exchanges – Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE), and the listing will take place within 12 working days from the issue closure date. Moreover, there is no option with the bondholders for a premature redemption and there is no option either with the company to buyback these NCDs from the investors.

Demat Mandatory except Series II, Series V and Series VIII NCDs – Though demat account is not mandatory to apply for these NCDs, however investors can apply for these NCDs in physical form only for Series II, Series V and Series VIII NCDs. Notably, these NCDs will pay interest rates on an annual basis.

TDS – Interest income earned on these NCDs is taxable and the investors are required to pay tax on it as per the respective tax slabs they fall into. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000. NCDs held in demat mode will not attract any TDS.

Should you invest in SREI Equipment Finance NCDs?

Infrastructure finance space has been facing a really difficult time over the past few years. But, off late it has been recovering well for the company and it has been able to improve on its asset quality front. The company has been able to contain its gross NPAs from 4.97% in FY14 to 2.48% in FY17 and net NPAs from 4.07% to 1.76% in the same period. However, this improvement has come at the cost of a slowdown in its revenue growth and net interest income.

Worst is probably not over for the company. But going ahead, with an expected improvement in the economy and the infrastructure space, the company is likely to do better and grow at a relatively higher speed.

Financials of SREI Equipment Finance Limited

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

Investors, with an appetite of taking some risk and who fall in the lower tax brackets, can consider investing in these NCDs. But, as the investment period is long, the investors would do well to be vigilant about the company’s asset quality and loan growth going forward.

In a falling interest rate scenario, 9.92% effective yield is quite attractive. But then 10 years is a long period to invest with a private company. Out of the nine options available, I would personally prefer Series I, with monthly interest payment option, as I would like to get back my principal investment amount and the interest thereon with a private company as early as possible.

Application Form – SREI Equipment 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 SREI Equipment Finance NCDs, you can reach us on +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 skukreja@investitude.co.in

Mahindra & Mahindra Financial Services Limited, working & popularly known as Mahindra Finance, is launching its issue of non-convertible debentures (NCDs) from the coming Monday i.e. July 10th. The company is offering interest rates in the range of 7.86% to 8.05% for a period of 7 years to 15 years. The company plans to raise Rs. 2,000 crore from this issue and use it primarily for further lending and refinancing of its existing loans.

The issue is scheduled to close on July 28, however the company is free to close it much earlier if it gets the desired subscription well before that. These NCDs are ‘AAA’ rated, so many institutional investors and/or risk-averse investors would like not to miss this opportunity.

As we analyse it further, let us take a quick look at the salient features of this issue:

Size & Objective of the Issue – Base size of this issue is Rs. 250 crore, with a green-shoe option to retain an additional Rs. 1,750 crore, 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, to refinance its existing loans and for long-term working capital and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry a coupon rate of 7.86% p.a. for a period of 7 years, 8.01% p.a. for 10 years and 8.05% for 15 years. There are no options for monthly or cumulative interest payments.

For Category I and Category II investors, these NCDs will carry 0.10% lower rate of interest.

Minimum Investment – Investors are required to subscribe to at least ten units of these NCDs, thus making it a minimum investment of Rs. 10,000.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three 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 – 10% of the issue i.e. Rs. 200 crore

Category III – High Net-Worth Individuals (HNIs) & HUFs – 35% of the issue i.e. Rs. 700 crore

Category IV – Retail Individual Investors – 35% of the issue i.e. Rs. 700 crore

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 the issue 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 – Rating agencies, India Ratings (IND) and Brickwork Ratings (BWR) have rated this issue as ‘AAA’ with a ‘Stable ‘ outlook. Debt instruments with such a rating are considered to have the highest degree of safety regarding timely payment of interest and principal.

Unsecured NCDs – These NCDs are ‘Unsecured’ in nature i.e. in case of any default on its payment of interest or principal, the bondholders will not have any right on any of the assets of Mahindra Finance.

Listing, Premature Withdrawal & Put Option – These NCDs will get listed only on the Bombay Stock Exchange (BSE) and the listing will take place within 12 working days from the issue closure date. Moreover, there is no option with the bondholders for a premature redemption back to the company. In order to encash their investments, they need to sell these bonds on the stock exchange once they get listed.

Call Option – The company will have the option to call Series III of these NCDs at the end of the 10th year from the issuance date. The investors will not be compensated in any way for such an action.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors will have the option to apply for these NCDs in physical or certificate form as well.

TDS – Interest income earned on these NCDs is taxable and the investors are required to pay tax on it as per the respective tax slabs they fall into. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000. NCDs held in demat mode will not attract any TDS.

Should you invest in Mahindra Finance NCDs?

Despite having a ‘AAA’ rating, I find no compelling reason for me to invest in such NCDs, except only two reasons – the liquidity comfort you get with the listed NCDs and longer tenors of the issue in case the interest rates drop further in the medium to long term.

But, even these two factors are not attractive enough for me to invest my money in this issue. The interest rates the company is offering are extremely unattractive to me. In fact, they are very close to most of the Post Office Small Saving Schemes. PPF is fetching 7.8% tax-free interest rate, while NSCs carry 7.8% taxable interest rate. While these are the instruments which any class of investor can invest in, other instruments which are meant for specific categories of investors offer even higher rate of interest. While Senior Citizen Savings Scheme carries 8.3% rate of interest, Sukanya Samriddhi Yojana offers even higher rate of interest of 8.4%, and that too tax-free.

Post Office Small Saving Schemes are more or less 100% safe and therefore the investors don’t require any kind of credit rating for their investments. Low liquidity and no scope of capital appreciation are the two reasons which stop me to invest in most of these post office small saving schemes.

Finally, if you want some alternative to bank fixed deposits (FDs), would like to play 100% safe as far as your capital is concerned and trust the management of the Mahindra group, then only I think these NCDs are meant for you. Otherwise, just give this issue a pass and invest your money in some better opportunities elsewhere.

Application Form – Mahindra 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 Mahindra Finance NCDs, you can reach us on +91-9811797407