This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at email@example.com
Manappuram Finance Limited, one of the leading listed gold loan NBFCs which lends money against gold jewellery, would be launching its issue of non-convertible debentures (NCDs) from Monday, December 30th.
The company plans to raise Rs. 100 crore from the issue and in case the issue gets oversubscribed, it has the right to exercise the green-shoe option to retain another Rs. 100 crore, thus making it a Rs. 200 crore issue.
The issue is scheduled to remain open for three weeks to get closed on January 20, 2014.
Interest Rates on Offer – Taking cues from the Muthoot issue, which got launched a couple of days back, the company has decided to offer eleven interest payment options to the investors carrying rates between 11% to 12.50% per annum.
“Double Your Money” Option – Like Muthoot issue, Manappuram also offers its investors to earn back twice the amount they invest during the offer period. But, Manappuram is doing it in 70 months i.e. faster by two months.
Should you go for it? I don’t think so. I think Manappuram is a riskier company to invest with. Also, though it seems quite attractive to hear money will get doubled in 70 months, it is better to be safe than sorry. I think it is better to go for the shortest possible durations with company NCDs.
Coupon Rates for Non-Retail Investors – This is one thing which differentiates these two issues. Manappuram has kept the coupon rates for the non-retail investors exactly the same as they are for the retail investors and probably that is the reason the quota for the non-retail investors is higher.
Ratings & Nature of NCDs – CRISIL has assigned “A+/Negative” rating to this issue which is a notch lower than ‘AA-’ rating CRISIL has assigned to the Muthoot issue and reflects its negative outlook for the issue. However, these NCDs are secured in nature and the claims of its investors will be superior to the claims of any unsecured creditors of the company.
Listing, Demat & TDS – These NCDs are proposed to be listed on the Bombay Stock Exchange (BSE) only. Investors have the option to apply these NCDs in physical form as well as demat form.
The interest earned will be taxable as per the tax slab of the investors and TDS will be applicable if the interest amount exceeds Rs. 5,000. But, NCDs taken in the demat form will not attract any TDS.
Minimum Investment – The investors are required to put in at least Rs. 10,000 in the issue i.e. at least 10 bonds of face value Rs. 1,000 each.
NRI Investment – Non-Resident Indians (NRIs) are eligible to invest in this issue, on a repatriation as well as non-repatriation basis.
Categories of Investors & Allocation Ratio – The investors would be classified in the following four categories and each category will have the following percentage fixed for the allotment:
Category I – Institutional Investors – 10% of the issue size is reserved
Category II – Non-Institutional Investors including corporates – 20% of the issue size is reserved
Category III – High Networth Individuals including HUFs & NRIs – 20% of the issue size is reserved
Category IV – Retail Individual Investors including HUFs & NRIs – 50% of the issue size is reserved
Investors investing Rs. 5 lakh or less will be considered as the retail investors.
As shown in the table above, Manappuram offers slightly higher rate of interest to its retail investors as compared to the Muthoot issue and that too only for the 36-month options and 70-month option. As compared to the tax-free bonds or NCDs issued by other sound issuers, these NCDs are riskier from credit default point of view and I would not advise any of my clients to invest in this issue.
Application Form of Manappuram NCDs
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in Manappuram NCDs, you can contact me at +919811797407
12 thoughts on “Manappuram Finance NCDs Issue @ 12.50%”
When will come your next ncd
Manappuram NCDs issue got closed today. Here are the final subscription figures:
Category I – Nil subscription as against Rs. 20 crore reserved
Category II – Rs. 0.11 crore as against Rs. 40 crore reserved
Category III – Rs. 27.91 crore as against Rs. 40 crore reserved
Category IV – Rs. 199.65 crore as against Rs. 100 crore reserved
Total Subscription – Rs. 227.67 crore as against total issue size of Rs. 200 crore
It is just amazing how the retail investors get trapped with such issues and when something gets wrong with the company, they have nobody to blame, but the government. Retail investors should focus on the institutional moves as they are the smarter investors.
Hi Shiv. Is interest on NRI investment in NCD taxable?
Yes, it is taxable Ankur.
Thanks. Can we cover in a separate post, best investment options for NRIs. At the moment it seems, tax free NRE FDs are best bet with 9% tax free return. What are other tax free options for NRIs. Is NRI Bonds a serious idea from Govt/RBI. ?
I think Manshu would be a better person to cover such a topic related to NRI investments. I’ll ask him if he would be able to cover that for us.
Also, I don’t think the government wants to attract dollars through NRI bond issues. Had it been the case, they would have done it 4-5 months back.
Thanks for the suggestion, I’ll do a post on this soon.
SREI Infrastructure Finance Limited is a private company and this issue is a normal NCD issue. Government has allowed only PSU’s to issue TFB.
Thanks Parijat for answering Amlan’s query!
Hi Shiv, can u let me knw the lock in period if any in this issue…
Thanks in advance
There is no lock-in period with these NCDs.
In SBI online account, under ASBA services, apart from Manappuram Finance and NHB, I see a new entry for “SREI Infrastructure Finance Limited”. Is it normal NCD or anything related to TFB/80CCF?