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IIFL Finance Limited 9% NCDs – January 2023 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at shivskukreja@gmail.com

IIFL Finance will be launching its public issue of non-convertible debentures (NCDs) from January 6, 2023. The company wants to raise Rs. 1,000 crore from this issue, with base issue size of Rs. 100 crore and an additional green-shoe option of Rs. 900 crore. The issue is scheduled to close on February 18.

The company is offering interest rate in the range of 8.50% for 24 months and 9% for 60 months. The issue is rated “CRISIL AA/Stable” by CRISIL Limited and “[ICRA] AA (stable)” by ICRA Limited.

Here are some of the salient features of the issue:

Size & Objective of the Issue – Base size of the issue is Rs. 100 crore, with an option to retain oversubscription of an additional Rs. 900 crore, making the total issue size to be Rs. 1,000 crore. The company plans to use the issue proceeds for the purpose of onward lending, financing, refinancing the existing indebtedness and other general corporate purposes.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 9% p.a. for a period of 60 months, 8.75% p.a. for 36 months and 8.50% p.a. for 24 months. These rates would be applicable for annual and cumulative interest payment options only. Monthly interest payment option is available only for 60 months period and coupon rates for the same would be 8.65% p.a., interest payable on a monthly basis.

Demat & ASBA Mandatory – Investors will not have the option to apply for these NCDs in physical or certificate form as demat account is mandatory to invest in these NCDs. Like equity IPOs, SEBI made ASBA mandatory to apply for these debt issues also effective October 1, 2018. In case of physical applications, you need to sign on the application form as per your bank records for ASBA.

Credit Rating & Nature of NCDs – CRISIL and ICRA have been appointed as the credit rating agencies for this issue. Both CRISIL and ICRA have rated the issue as ‘AA’ with a ‘Stable’ outlook. Moreover, these NCDs would be ‘Secured’ in nature.

Categories of Investors The company has decided to categorise investors in the following four categories:

Category I – Institutional Investors – 10% of the issue is reserved i.e. Rs. 100 crore

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

Category III – High Net Worth Individual Investors (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 400 crore

Category IV – Resident Individual Investors (RIIs) including HUFs – 40% of the issue is reserved i.e. Rs. 400 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.

Minimum Investment – An investor needs to invest a minimum of Rs. 10,000 in this issue i.e. 10 NCDs worth Rs. 1,000 each.

Listing, Premature Withdrawal – These NCDs are proposed to be listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 6 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on either of the stock exchanges.

No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR.

But, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.

Application Form of India Infoline Finance Limited NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in IIFL Finance NCDs, you can contact us at +91-9811797407

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RBI’s 7.35% Floating Rate Saving Bonds

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

Investors often seek safe-havens for their hard earned money, and nothing could be more safe than the securities which are issued by the government or the central bank of a country. It is even better if the interest rates earned on these investments are higher than some of the other investment options which are not as safe and secured as these investments are.

One such investment available to the Indian investors is RBI’s 7.35% Floating Rate Saving Bonds (FRSBs). These bonds are issued by the Reserve Bank of India on behalf of the Govt. of India and are open for subscription throughout the year. RBI has given authority to the State Bank of India (SBI), other nationalised banks like Bank of Baroda, Canara Bank, Punjab National Bank (PNB), Bank of India and Union Bank among others, and only four private sector banks, namely HDFC Bank, ICICI Bank, Axis Bank and IDBI Bank, to accept applications for these bonds.

Here are some of the other salient features of these bonds:

Coupon Interest (Floating) & Payment Dates

Interest payable on these bonds is 35 basis points (or 0.35%) per annum higher than the interest payable on the National Saving Certificates (NSCs) which is set and announced periodically by the Govt. of India. Effective January 1, 2023, NSCs carry interest rate of 7% per annum. So, these bonds yield 7.35% per annum to its investors.

This interest of 7.35% per annum is reset on a semi-annual basis based on the fixation of interest rate on NSCs and payable on January 1 and July 1 every year. Interest gets credited to the investor’s bank account electronically.

Who is eligible to invest in these bonds?


1. A person resident in India is eligible to invest in these bonds:
* in her or his individual capacity, or
* in individual capacity on joint basis, or
* in individual capacity on any one or survivor basis, or
* on behalf of a minor as father/mother/legal guardian


2. A Hindu Undivided Family (HUF) is also eligible to invest in these bonds.

Non-Resident Indians (NRIs) are not eligible to invest in these bonds. However, if the holders of these bonds, subsequent to their investments, attain the NRI status, then they can continue to hold on to their investments subject to the provisions of the Foreign Exchange Management Act (FEMA) guidelines.

Investment Limit

There is no maximum limit for investment in these bonds. So, you can invest as much as you want to.

Tax Treatment & Tax Deduction (TDS)

Interest earned by the investors on these bonds is fully taxable as per the tax slab of the investor. Tax gets deducted at source while making periodical interest payments. In case an investor is not liable to pay any tax in a financial year, she/he may submit a declaration in order to avoid TDS deduction.

Issue Price & Minimum Investment Amount

These bonds carry a face value of Rs. 100, and issued for a minimum investment amount of Rs. 1000 and in multiples thereof.

Mode of Issuance

These bonds are issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the receiving office of the intermediate bank. However, as a proof of subscription, a certificate of holding is issued to the holder/s of these bonds.

Nomination

Investors may nominate one or more persons as nominee(s) while making their investments, who in the event of death of the bondholder(s) would be entitled to these bonds and the principal and interest payments due thereon. Even a minor could be a nominee in these investments. However, nomination is not allowed if the investment is made in the name of a minor, as such investments will have parents or legal guardians to take care of the investment in case of untimely demise of the minor investor. Investors may even make changes in their nominees subsequent to their investments.

Transferability

These bonds are not transferable, except transfer to a nominee or legal heir in case of death of the holder of these bonds.

Tradability & Collateral

Unlike tax-free and other taxable bonds, these bonds are not tradable in the secondary markets and not even eligible as collateral for availing loans from banks, NBFCs and other financial lenders.

Lock-In Period and Maturity

These bonds are issued for a period of 7 years and you cannot withdraw your investment amount before this period if your age is less than 60 years. In other words, premature encashment is allowed only if the investor is an individual and aged above 60 years.

Lock-in period for investors in the age bracket of 60-70 years is 6 years from the date of issue, while the same is 5 years for individuals aged between 70-80 years and 4 years for individuals aged 80 years and above. So, the shortest lock-in period with these bonds is 4 years before which investors cannot withdraw their money.

Our Take

Personally, I consider these bonds as one of the safest fixed income investments for the Indian investors, with no or least volatility in their principal investment amount as well as coupon interest rate. But, lack of liquidity with no premature withdrawal is its biggest negative factor for a lot of investors. If you need to invest your money for a medium to long term and don’t want to take any risks, then these bonds are meant for you. Definitely go for them!

Post Office Small Saving Schemes, PPF – January 2023 Interest Rates

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

The government has announced the interest rates on Post Office Small Saving Schemes for the January-March 2023 quarter. The finance ministry made this announcement yesterday only through a notification. The interest rates on schemes like the Senior Citizen Savings Scheme (SCSS), National Savings Certificate (NSC), Monthly Income Savings Scheme (MIS), Kisan Vikas Patra (KVP) and 1-5 year time deposits have been hiked in the range of 0.20% to 1.10% per annum.

However, interest rates on the Public Provident Fund, popularly called PPF, Sukanya Samriddhi Yojana/Account (SSA), post office savings bank account and recurring deposits have been left unchanged, leaving many of the investors quite disappointed.

Here you have the table having all the small saving schemes with their applicable interest rates and tax benefits for the quarter starting January 1, 2023:

Public Provident Fund (PPF) – Rate Left Unchanged at 7.10% – Leaving most investors disappointed, interest rate on PPF, the most popular small savings scheme, has been left unchanged at 7.10%. Interest earned on PPF is tax-free on maturity and investment up to Rs. 1.50 lakh gets you tax exemption under section 80C.

Sukanya Samriddhi Yojana (SSY) – Rate Left Unchanged at 7.60% – Government’s pet scheme for girl child, Sukanya Samriddhi Yojana, has also been left untouched with interest rate fixed at 7.60%. So, the gap of 0.50% between this scheme and PPF still exists, which should keep its popularity intact.

Interest earned on Sukanya Samriddhi Yojana is also tax-free on maturity and investment up to Rs. 1.50 lakh gets you tax exemption under section 80C.

National Savings Certificates (NSCs) – Rate Hiked from 6.80% to 7% – There is good news for the investors interested in National Savings Certificates (NSCs) and RBI’s Floating Rate Bonds also, which are linked to the prevailing interest rate on NSCs. The government has decided to increase interest rate offered with NSCs from 6.80% to 7%. So, RBI Floating Rate Bonds, which carry coupon rate of 7.15% till now, will carry 7.35% with effect from January 1, 2023, 0.35% higher than 7% interest NSCs will offer. Your investment in NSCs will keep giving you tax exemption under section 80C.

Senior Citizens Savings Scheme (SCSS) – Rate Hiked from 7.60% to 8% – There is some good news for the senior citizens at least. The interest rate on Senior Citizen Savings Scheme has been increased to 8% from 7.60% earlier. The interest earned on this scheme is taxable for its investors and subject to TDS as well. However, your investment gets you a deduction of up to Rs. 1.50 lakh under section 80C.

Post Office Monthly Income Scheme (POMIS) – Rate Hiked from 6.70% to 7.10% – Post Office Monthly Income Scheme will also have an interest rate hike from an earlier 6.70% to 7.10% p.a. Once favourite with its investors, this scheme has become less favourable now.

Kisan Vikas Patra (KVP) – Tenure Reduced from 123 Months to 120 Months – Your investment in KVP used to get doubled in a period of 123 months till now. With effect from tomorrow, it will take 120 months for it to do the same. This scheme will earn you 7.20% p.a. effectively.

Our take – Though it is a tough thing to digest for the small savers, especially with PPF and Sukanya Samriddhi Yojana in which no changes have been made, I think the government has done it rightly. It is a difficult task to keep everyone happy in the country and at the same time, carry out economic reforms for an overall development.

Inflation and interest rates have been going up for a while now. The government has cautiosly increased interest rates on these small saving schemes, hoping inflation to cool down at some point of time in the near future. This move will send right signals to the global investors that the government is still serious about keeping its borrowing costs and debt levels in check and removing anomalies existent in the system.

Edelweiss Financial Services 10.45% NCDs – January 2023 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at shivskukreja@gmail.com

Edelweiss Financial Services Limited is going to launch its public issue of secured and redeemable non-convertible debentures (NCDs) from January 3 i.e. the coming Tuesday. The company expects to raise around Rs. 200-400 crore from the issue.

It is going to offer interest rates between 9% to 10.45% per annum, with maturity periods ranging between 24 months to 120 months. The issue will remain open till January 23.

Salient features of the issue:

Size & Objective of the Issue – Edelweiss expects to raise Rs. 400 crore from this issue, including the green-shoe option of Rs. 200 crore. The company plans to use at least 75% of the proceeds for the repayment or prepayment of interest and principal of its existing loans and the remaining proceeds for other general corporate purposes.

Tenors & Coupon Rates on Offer – Edelweiss has decided to issue these NCDs for a duration of 24, 36, 60 and 120 months. The company is offering interest rates in the range of 9% to 10.45% per annum, with interest payable monthly, annually and on a cumulative basis.

Higher Coupon Rate for Edelweiss Shareholders or NCD/Bond holders – Edelweiss has also decided to offer an additional 0.20% p.a. to the shareholders of the company and/or the holders of the NCDs/bonds issued by any of its subsidiaries including ECL Finance Limited, Nuvama Wealth & Investment Limited, Edelweiss Housing Finance Limited, Edelweiss Retail Finance Limited and Nuvama Wealth Finance Limited. So, even if you hold one equity share of Edelweiss or an NCD of any of the asssociate companies, you will get this additional rate of interest.

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 – 10% of the issue

Category II – Non-Institutional Investors – 10% of the issue

Category III – High Networth Individuals (HNIs), including HUFs, investing more than Rs. 10 lakhs – 40% of the issue

Category IV – Retail Individual Investors, including HUFs, investing Rs. 10 lakhs or less – 40% of the issue

NCDs will be allotted on a first-come first-served basis.

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

Rating of the Issue – These NCDs have been rated “CRISIL AA-/Negative” by CRISIL Ratings for Rs. 100 crore of the issue and “ACUITE AA-/Negative” by Acuite Ratings & Research for Rs. 100 crore of the issue.

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

Listing, Premature Withdrawal & Put/Call Option – The company is going to get its NCDs listed on the Bombay Stock Exchange (BSE) within six working days from the date of issue closure. The investors will not have the option to redeem these bonds back to the company before the maturity period gets over, but they can always sell these bonds on the stock exchange anytime they want. However, liquidity remains an area of concern with such NCDs.

There is neither any put option with the investors of these bonds nor there is a call option with the company to pay back early.

Minimum Investment – The investors will be required to apply for at least 10 NCDs in this issue which makes it a minimum investment of Rs. 10,000.

Registrar – KFin Technologies Limited has been appointed as Registrar to the issue.

Application Form of Edelweiss Financial Services Limited NCDs

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

A good credit card for NRIs based out of US who fly overseas frequently

Before getting into the content of the post, let me very briefly state my personal plans for blogging, and the rationale behind those plans.

I gave up on blogging a few years ago because I was outside India for a very long time, and found myself out of touch with the Indian markets, and found it difficult to write about Indian personal finance.

Shiv kept the blog alive, and in some ways OneMint kept itself alive as I am quite consistently surprised at the traffic the blog still gets, and its resilience. I have always missed blogging, but due to the lack of a clear purpose in my head I wasn’t able to commit myself to it again.

That has changed in the last month or so, and I have decided to resume writing once again with a focus on NRIs in the US, as this is the area most familiar to me because I am one myself, and I hope to write about one post per week and answer all comments.

With that said, let me get to the content of the post itself.

I booked a number of long distance air tickets recently, and wondered why I don’t have a travel credit card? A quick search revealed that the Chase Sapphire Preferred Credit Card is one of the most popular and recommended credit cards for people who travel a lot. This is not a free credit card, and comes with an annual fee of $95, and prior to getting this card I didn’t have any other card on which I paid a fee.

So, why did I choose to get this card? For starters, they have a sign up bonus of $600 that you can get if you spend $4,000 in the first four months. I know that I will be able to get this bonus, as I have some big ticket purchases planned in the near future, so that pretty much means that even if I do nothing else with the card the fee will be paid for by the bonus itself.

But that’s not really a reason to get the card. The reason I was attracted to the card is that they give you one point for every dollar you spend, where one point is equal to one cent, so a 1% cashback on all purchases.

But more importantly they give 2 points on all travel and dining purchases which can really add up when you consider the high cost of overseas tickets, and you can also use these points to book tickets from their portal and transfer them as miles to partner airlines. You also get 25% more rewards when you redeem your points through Chase Ultimate Rewards but I am not sure how that practically works. I do however have a friend who has done this and told me it works seamlessly, so I am looking forward to try this out myself as well.

The interest rate on the card is really high, so you should definitely pay off the balance if you intend to get this card, and I have read some really bad reviews about people trying to claim insurance on canceled trips, so that wasn’t a factor in my decision to getting this card.

I will write a follow up post once I start using this card, and more importantly once I redeem a reward and see how it practically works, but for now I am looking forward to my new credit card.

Please leave a comment if any of you have this card, and what your experience with it has been, and if you have any other travel card that you think is better than this one, especially one that gives you international lounge access as that’s one thing that I wanted but this card didn’t have.

Book Review – Modifying Investor Behavior – It not a Number Game It’s a Mind Game

My good friend – Hemant Beniwal of the The Financial Literates recently published a new book, and I just finished reading it this morning.

This is a fantastic book, and I can whole heartedly recommend it to anyone interested in improving their finances.

Hemant has written an easy to understand book with powerful concepts that are very important in your journey to invest better, and be financially secure.

The book is divided into ten messages and Hemant provides commentary on all of his messages and I can say that I agree with every one of them.

Here is a picture from his book about his commandments.

I will write about numbers 1, 2, 6 and 8 here just because they are closer to my heart than the other topics.

Equity is the best asset class: From my own experience I can say that I agree very much with this statement. If you are investing in equities for a long period of time then they will in all likelihood exceed returns from every other asset class. Understanding equity in the sense of buying a business, and then holding on to it makes it easier to own stocks for very long, and in this manner you can emulate some of the top investors in the world.

Hemant has written a very nice chapter on why you can’t imitate a Warren Buffett or Peter Lynch, and I agree with that too. You won’t ever have the same access to a float that Warren Buffett had or the ability to pour through annual reports, but by modeling your thinking on the way he thought you can certainly benefit from investing the way he did.

Timing is impossible: This is also an important subject, and Hemant has captured it quite beautifully and simply. It is just not humanly possible to time the market, but the good news is that you don’t need to. You need to invest for the long term and do it consistently. That will be the key to returns, not buying on dips, and selling on highs.

Bear markets are a true friend: People who don’t invest consistently or who haven’t seen bear markets often panic when the markets crash, and sell out everything at a loss. This is the opposite of what you need to do if you need to make money in the market. Don’t Panic is the mantra.

Investing is simple, but not easy: I think this is the essence of the book. Hemant propounds principles that have been known to us for decades, and have proven to work. You don’t need to be an astro physicist to understand them. Why then do so few people follow it? Because they aren’t easy. When every ‘expert’ on TV is talking about crashes and panics how can you hold on to your stocks then? Some things about investing are counter intuitive until you internalize them and see them work in your own portfolios, and at that time it becomes second nature to you.

Conclusion

This is a very good book written by an honest, and sincere professional that everyone can benefit from. The book resonates with me deeply because I have seen these principles work in my own investments over a decade through even the great recession, and countless crashes before and after that.

Please spend the few hours needed to read Modifying Investor Behavior – It not a Number Game It’s a Mind Gameand apply it to your own investing life.

Muthoot Finance 10% NCDs – February 2019 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at shivskukreja@gmail.com

Muthoot Finance has launched its latest public issue of secured, redeemable, non-convertible debentures (NCDs) from today, February 14, 2019. The company plans to raise Rs. 750 crore from this issue, including the green-shoe option to retain oversubscription of Rs. 650 crore. These NCDs will carry coupon rates between 9.25% for 24 months and 10% for 60 months.

Maturity period will range between 24 months to 60 months, having monthly, annual and cumulative interest payment options. The issue is scheduled to remain open for a month to close on March 14, 2019. However, in case of oversubscription above Rs. 100 crore, the company has the right to close it prematurely.

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. 100 crore and the company will have the option to retain oversubscription to the tune of Rs. 750 crore, including the green-shoe option of Rs. 650 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.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 10% p.a. for a period of 60 months, 9.75% p.a. for 38 months and 9.50% p.a. for 24 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available and coupon rates for these periods are 9.75% p.a., 9.50% p.a. and 9.25% p.a. respectively.

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. 150 crore

Category II – Non-Institutional Investors & Corporates – 20% of the issue is reserved i.e. Rs. 150 crore

Category III – High Net Worth Individuals (HNIs) & HUFs investing more than Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 225 crore

Category IV – Retail Individual Investors, including HUFs investing up to Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 225 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 – The company 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 – No TDS in Demat Form – Interest income with these 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, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.

Listing, Premature Withdrawal – 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 6 working days from the closing date of the issue. There is no option of a premature redemption back to the company, but the investors can always sell these NCDs on the stock exchange to encash their investments.

Should you invest in Muthoot Finance NCDs?

Financial results declared by both the gold-financing companies, Manappuram Finance and Muthoot Finance, have been above analysts expectations for the two straight quarters in a row. So, from the fundamentals point of view, both these companies are doing good and it seems there is no immediate threat to their business model due to the recent NBFC liquidity crisis, as well as the NPA issues.

The interest rates offered by Muthoot this time around are exactly 1% higher as compared to its previous issue of April 2018. Given the fundamentals are still strong and the asset quality too is not deteriorating in any negative manner, the interest rates on offer look reasonable.

However, the point again is whether one should take risk with these NBFCs for a slightly higher rate of interest these companies are offering. The answer is ‘No’, if you have a limited amount to capital to invest and it is your hard earned money you need to invest to achieve any of your long term financial goals. You should also avoid it if you are in a higher tax bracket.

I also have a view that you should not make more than 5-10% of your debt investment with any one such private company. So, if you have already invested a sizable amount with Muthoot, then you should avoid increasing your exposure here. Investors, who understand risk with such debt investments and are not liable to pay high tax on their taxable investments, can consider investing in these NCDs.

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

L&T Finance 9.35% NCDs – March 2019 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

L&T Finance is going to launch its public issue of secured, redeemable, non-convertible debentures (NCDs) from this coming Wednesday, 6th of March. The company plans to raise Rs. 1,500 crore from this issue, including the green-shoe option to retain oversubscription of Rs. 1,000 crore. These NCDs will carry coupon rates between 8.89% for 60 months and 9.35% for 120 months.

Maturity period will range between 37 months to 120 months, having monthly, annual and cumulative interest payment options. The issue is scheduled to remain open for 15 days only to close on March 20, 2019. However, in case of high demand for these NCDs and raising Rs. 1,500 crore before 20th March, the company might close it prematurely.

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 the company will have the option to retain oversubscription to the tune of Rs. 1,500 crore, including the green-shoe option of Rs. 1,000 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.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 9.35% p.a. for a period of 120 months, 9.25% p.a. for 60 months and 9.10% p.a. for 37 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, and coupon rates for these periods would be 8.98% p.a. and 8.89% p.a. respectively.

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. 300 crore

Category II – Non-Institutional Investors & Corporates – 20% of the issue is reserved i.e. Rs. 300 crore

Category III – High Net Worth Individuals (HNIs) & HUFs investing more than Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 450 crore

Category IV – Retail Individual Investors, including HUFs investing up to Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 450 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 – ICRA, CARE and India Ratings, the three rating agencies involved in this issue, have assigned ‘AAA/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 – The company 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.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues also, effective October 1, 2018. So, you are no longer required to issue cheques to apply for these NCD issues. In case of physical applications, you just need to sign on the application form as per your bank records.

Taxability & TDS – No TDS in Demat Form – Interest income with these 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. However, 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, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.

Listing, Premature Withdrawal – L&T Finance has decided to get its NCDs listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). Allotment as well as listing of these NCDs will happen within 6 working days from the closing date of the issue. There is no option of a premature redemption back to the company. However, the investors can always sell these NCDs on the stock exchanges to encash their investments.

Should you invest in L&T Finance 9.35% NCDs?

What we have seen recently in the cases of IL&FS and especially DHFL, it has taught us that nothing is permanent in the financial world and things could change very quickly with any of the private lenders. It doesn’t mean that we should never invest with private companies. I just want to reiterate here that one should be mentally prepared for any kind of adverse event with private companies, and enough research should be done before you hand over your hard-earned money to these private companies.

L&T Finance is a fundamentally sound company and has the brand name of L&T to generate trust with its investors. Probably that is why also it has been rated ‘AAA’ by the rating agencies. But, after all it is a private company. As I have expressed my views earlier as well, one should invest in such debt instruments of private companies for the shortest maturity period, and here 120 months is a very long period of investment with a private company. So, personally I would advise my clients to avoid such a long period of investment with L&T Finance. If you trust L&T Finance more than any other private lender, then you should go with 60-months tenor, otherwise there is not much difference in interest rates of 60 months and 37 months tenors. So, ideally one should invest for 37 months only.

On the other hand, more conservative investors should wait for the NHAI issue details to get announced. God knows why, but the wait for the NHAI issue has been longer than what I initially expected. I hope they issue their bonds this month itself, otherwise I don’t think their issue will see the light anytime before the elections get over and it could even get delayed by 2-3 months after the new government gets going.

Application Forms – L&T 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 L&T Finance NCDs, you can contact us at +91-9811797407

Bharat 22 ETF – February 2019 Additional Offer

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

ICICI Prudential AMC has launched an additional offer for Bharat 22 ETF in order to raise a minimum of Rs. 3,500 crore for the government to meet its disinvestment target for FY 2018-19. This additional offer will remain open for today only and the company will accept its applications till 8 pm in the evening today.

As the name suggests, Bharat 22 ETF has 22 companies as its constituents, 3 of which are private companies – Axis Bank, ITC and L&T, and rest 19 are public sector enterprises, few of them are ONGC, SBI, IOC, Coal India, NTPC, Power Grid, BPCL and GAIL.

Bharat 22 ETF closely tracks “S&P BSE Bharat 22 Index”. This index has been designed by the Bombay Stock Exchange (BSE) in consultation with the government.

Before we check how the issue looks from an investment point of view, let us take a look at some of its key features:

Investment Objective – Bharat 22 ETF intends to generate returns that closely correspond to the total returns earned by the securities as represented by the Bharat 22 Index. However, the performance of the scheme may differ from that of Bharat 22 Index due to tracking error and also due to the scheme expenses.

Offer Timeline – Unlike its NFO in November 2017, this additional offer will remain open for just one day only i.e. today, January 14, 2019. It is a very short period of time provided for this investment, but that is how it should be for the offers for sale (OFS) and exchange traded funds (ETFs).

Reference Market Price/NAV – As Bharat 22 ETF is already listed on the stock exchanges, you will not get its units allotted at its face value of Rs. 10. Its last trading price on the NSE today was Rs. 32.98. So, the investors should expect the allotment price to be around this price only, adjusted for a discount of approximately 3.9% for the individual investors.

The daily NAV of this scheme is based on the Bharat 22 Index, and the allotment price would be approximately equal to 1/100th of Bharat 22 Index and calculated post adjusting approx. 3.9% discount offered by the government to Bharat 22 ETF for buying the underlying Bharat 22 Index shares.

Approximately 3.9% Discount for Investors – Investors making an investment during the offer period will be given a discount of approximately 3.9% on their investment. Yes, you have read it right here. The discount you must have heard or read elsewhere would have been 5%. But, actually it is not 5%. The government is offering 5% discount to the investors of the ETF on the shares of the companies to be sold by the government. These are 20 such companies which carry a cumulative weightage of 78% in the Bharat 22 ETF. There will be no such discount on the remaining 2 companies, which carry a cumulative weightage of 22% in the Bharat 22 ETF.

Target Amount to be Raised – The government is targeting to raise Rs. 3,500 crore from this offer. However, in case of oversubscription, the government would like to retain the whole of oversubscription in order to bridge its disinvestment target gap. So, it is highly likely that full allotment will be made to the investors.

Minimum/Maximum Investment Size – Retail individual investors can invest in the scheme with a minimum investment amount of Rs. 5,000. To remain a retail investor, the investment limit has been set at Rs. 2 lakhs.

Demat Account Mandatory – As you cannot hold and trade ETFs in physical form, it is mandatory to have a demat account for you to invest in this scheme. Applications without relevant demat account details are liable to be rejected.

No Lock-In Period – As this is an ETF which gets traded on the stock exchanges, the investors can sell these units anytime post allotment.

Should you invest in Bharat 22 ETF Additional Offer?

Indian markets have underperformed the global markets by a huge margin this calendar year. We are down by approximately 3.5% year to date, as compared to an average positive return of 7% in global markets. But, this negative 3.5% too does not reflect the true picture of the kind of bloodbath we are having in our markets. Many of the mid-cap and small-cap stocks are trading below their 2014 levels, and many of them are down 50-80% from their January 2018 highs. It has been a very painful period for the investors post January 2018. So, if there is any stock or fund or a portfolio which has given a positive return, or has fallen less than 10% in the past 1 year or so, then the investors of that stock or fund or portfolio should actually thank God for saving their hard earned money.

This Bharat 22 ETF too has fallen less than 10% in the past one year, and I was really surprised to know that. Actually, Axis Bank and ITC have given positive returns in the past one year, and these two are the only stocks in this Bharat 22 ETF which have succeeded to remain in the green, while L&T and all its public sector enterprises have given negative returns.

When Bharat 22 ETF was launched in November 2017, most of its constituents were trading close to their 52-week highs, the momentum was favoring the stock markets, there was buoyancy all around and the government successfully raised Rs. 17,000 crore. The picture is pretty much different this time around. Most of its constituents are trading close to their 52-week lows, the momentum is not favoring the stock markets at all, there is pessimism all around and the government is targeting to raise only Rs. 3,500 crore, and might even fail to raise that.

Like earlier as well, I think it is the government’s policies which are going to drive the share prices of these companies and thereby this ETF. If you have a view that Modi government has done a good job for the country and its economy, and it could win the general elections in May 2019, then you should invest in this ETF for the medium to long term. However, if you think it is difficult for the BJP to make a comeback this time around, then I think you would do better to skip it for now, and wait for the markets to suffer a fall due to a knee-jerk reaction to the elections outcome and then deploy your money for long-term wealth creation.

ICICI Prudential Bharat 22 ETF Application Form

Should You Invest in Indiabulls Consumer Finance 11% NCDs?

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

Should you invest in Indiabulls Consumer Finance NCDs?

Indiabulls Consumer Finance Limited (IBCFL) is a wholly owned subsidiary of Indiabulls Ventures Limited. The company has a limited track record as it started its lending operations during 2016-17 only. It has a presence in three lending segments – personal loans (29% of total loan portfolio), secured SME loans (52%) and unsecured SME loans (19%) as on September 30, 2018.

IBCFL reported profit after tax (PAT) of Rs. 191.52 crore on a total income of Rs.700.07 crore during FY 2017-18, as against PAT of Rs. 6.69 crore on a total income of Rs. 57.24 crore during FY 2016-17. During the six-months period ending September 30, 2018, the company reported PAT of Rs. 199.29 crore on a total income of Rs. 657.87 crore.

The company launched its lending App ‘Indiabulls Dhani’ in the first half of FY 2017-18 for sourcing its personal loans along with sourcing of business loans, and has been able to scale up its operations significantly post that. Gross loan portfolio of the company stood at Rs. 10,140 crore as on September 30, 2018. Although, the asset quality parameters stood comfortable with Gross NPA ratio of 0.13% and Net NPA ratio of 0.03% as on September 30, 2018, the asset quality of its loan portfolio is yet to be tested as its loan portfolio remains largely unseasoned.

Now, the important question is “Whether this NCDs issue carrying high interest rate of 11% worth considering in this volatile, uncertain scenario?”. The answer could be simple theoretically, but it has really become very difficult to take a decision post the recent IL&FS and DHFL developments. DHFL NCD issues were rated ‘AAA’ till last week, and all these issues received overwhelming response from the institutional investors, corporate investors, and individual investors as well. So, when the NCDs from a ‘AAA’ rated company like DHFL are yielding more than 17-18% and are trading at a discount of more than 25-30%, then it really becomes difficult to take a decision whether to take any further exposure to NCDs of a similar private NBFC or not.

Personally, I would avoid any such NCD issues from a private issuer, at least for the time being, as the problem is that it is not easy to foresee any such problematic scenario well in advance for any such issuer. So, what should be done? Whether we should avoid all such NCD issues from the private companies? The answer is ‘Yes’, if you are a conservative investor, and you don’t want to lose your hard earned money, or if you don’t trust the management of the issuer, or you don’t know anything about the company and its management, or you don’t understand the business of the issuer, or you foresee a decline in the fortunes of the issuer or the industry it is operating in.

So, now when I’m writing these points for this post, I’m getting more and more closer to all those points which I consider while investing in equity shares of a company. Yes, that is the whole point. If you are a prudent investor, rules of investing should be similar for both equity, as well as debt investments, if not the same.

Although, on the other hand, I have a view that the interest rates it is offering are quite attractive and the growth it is showing in expanding its business network is also encouraging. So, if you have faith in Indiabulls Consumer Finance, and its management, and its business prospects, only then you should invest in this issue. Conservative investors should still wait for the NHAI to launch its bonds issue sometime in the last two months of the current financial year.

Application Form of Indiabulls Consumer 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 Indiabulls Consumer Finance NCDs, you can contact us at +91-9811797407