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

Muthoot Finance is launching its issue of non-convertible debentures (NCDs) of Rs. 2,000 crore from today. Like its January 2017 issue, Muthoot is offering coupon rates of 8% to 9.06% for different maturities ranging between 400 days to 96 months, having both Secured, as well as Unsecured NCDs. Though the issue is scheduled to remain open for a month to close on May 10, going by the response its previous issue received, I don’t think it would take one month for Muthoot to raise this amount.

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

Size of the issue – Base size of the issue is Rs. 200 crore and Muthoot will have the option to retain oversubscription to the tune of Rs. 2,000 crore, including the green shoe option of Rs. 1,800 crore. The company plans to raise this Rs. 2,000 crore by issuing Secured NCDs up to Rs. Rs. 1,950 crore and Unsecured NCDs up to Rs. 50 crore.

Minimum Investment – Minimum investment in this issue has been fixed at Rs. 10,000 i.e. 10 NCDs of face value Rs. 1,000 each.

Coupon Rates – Muthoot has again reduced its interest rates as compared to its previous issue in January. These NCDs will carry coupon rates in the range of 8% for 400 days to 9% for 60 months. Series I-X will all be Secured NCDs and Series XI will have Unsecured NCDs. Series XI NCDs will provide you an effective annual return of 9.06% in a period of 96 months.

Double your Money Option – As mentioned above, Series XI NCDs will offer cumulative interest option and will earn you a 100% return on your investment in a period of 8 years or 96 months. It would translate to an effective yield of 9.06% per annum. But, NCDs issued under this option are ‘Unsecured’ in nature, thus carry a slightly higher risk than Secured NCDs.

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

No Special Rates for Retail Investors – Unlike its previous issues, Muthoot has decided to offer same returns to all categories of investors this time around. I think this move would disappoint the retail investors and might make some of them to not invest in this issue.   

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. 400 crore

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

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

Category IV – Retail Individual Investors, including HUFs investing up to Rs. 10 lakhs – 30% of the issue is reserved i.e. Rs. 600 crore

Allotment on First-Come First-Served Basis – NCDs will be allotted on a first-come first-served basis in all these four categories.

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. All these NCDs are ‘Secured’ in nature, except NCDs issued under option XI which offer to double your money in 96 months.

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?

At present, there is huge liquidity floating around in the system. Investors are sitting with huge investible surplus in their bank accounts and waiting for the stock markets to correct before deploying their cash. Also, with inflation at multi year lows and no signs of interest rates moving up considerably from here, investors have very few bankable fixed income options either.

To cash it in such an investment scenario, Muthoot has been lowering its interest rates for a long time now. In this issue as well, Muthoot has lowered its interest rates for the retail investors and now it is not offering any preferential rates for the retail investors as compared to other categories of investors. So, as mentioned earlier as well, these interest rates by a private gold finance company do not attract me at all. If I need to invest my money with Muthoot, I would seek a higher return as compared to the rates it is offering in this issue of NCDs. Only aggressive investors should invest their money in this issue to get a slightly better return as compared to bank fixed deposits or post office schemes. Other investors should skip this issue and wait for some better opportunities.

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 +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

Falling interest rates on bank FDs has resulted in investors hunting for higher yield fixed income options, which in turn has prompted private NBFCs to launch a slew of NCD issues in the last 4-5 months. DHFL, Indiabulls Housing Finance, Reliance Home Finance, SREI Equipment Finance and Muthoot Finance, all have been successful in raising their full quota of required funds, at a much lower rate of interest and in a much shorter period of time as against how it used to happen 2-3 years back at a much higher rate of interest of 11-12%.

To join this bandwagon, SREI Infrastructure Finance Limited (SREI Infra) is launching its second issue of Secured Non-Convertible Debentures (NCDs) from today. These NCDs will carry 9.50% and 9.25% annual rate of interest for a period of 5 years and 3 years respectively. The issue will remain open for around four weeks to close on February 23.

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. 506.64 crore, thus making it a Rs. 706.64 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 and 9.12% p.a. payable on a monthly basis for a period of 5 years (60 months) and 9.25% p.a. payable on an annual or cumulative basis and 8.88% p.a. payable on a monthly basis for a period of 3 years (36 months). The issue will have the option of 400 days also, in which the investors will get 8.50% p.a. on an annual or cumulative basis.

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. Deemed date of allotment will be considered 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 three categories and each category will have the below mentioned percentage fixed in the allotment:

Category I – Institutional Investors – 10% of the issue i.e. Rs. 70.66 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 141.33 crore

Category III – Individual & HUF Investors – 70% of the issue i.e. Rs. 494.65 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. Moreover, these NCDs 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 secured assets of SREI Infra.

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 if NCDs are held in a demat form.

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?

Infrastructure financing sector has been facing headwinds for the past many years now. Firstly, many infra projects have been stuck at various stages due to various known and unknown reasons. Loans given for many such projects have become NPAs for infra financing companies, including SREI Infra. Secondly, as the economy is still struggling to have a healthy revival, demand for fresh loans as well has not revived. So, till the time we see this cyclical downtrend ending, we should not have high hopes from infra financing companies.

Moreover, as mentioned in my earlier reviews as well, these NCD issues by private companies offering 8.50% to 9.50% are not worth taking risk for me. Investors in the 30% tax bracket would earn 6.56% post-tax annual returns with 5-year NCDs. As you can check from the table above, already listed NCDs of SREI Infra or SREI Equipment Finance are already trading at a yield to maturity (YTM) higher than interest rates offered in this issue. So, it is better to buy their NCDs from the secondary markets.

If I am ready to bear some risk with my money, I would rather invest in equity mutual funds and hope for higher returns as against these NCDs with which though interest income is fixed, but also exists a remote risk of losing my principal as well in case the company goes bankrupt. However, risk-averse investors who are fairly confident about the operational efficiency of SREI Infra’s management and those who cannot take the volatility in returns of equity mutual funds or investors in the lower tax brackets can consider investing in these NCDs.

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

Demonetisation has resulted in a problem of plenty for the Indian banking system. Most banks are flushed with excess liquidity and have drastically reduced their deposits as well as lending rates. With such steep rate cuts, it is getting difficult for the conservative investors to park their money in safer investment options offering higher rate of interest.

In such a falling interest rate scenario, Muthoot Finance is launching its issue of non-convertible debentures (NCDs) of Rs. 1,400 crore from today. Muthoot is offering coupon rates of 8.25% to 9.25% for different maturities ranging between 400 days to 96 months having both Secured, as well as Unsecured NCDs. The issue is scheduled to remain open for a month to close on February 17.

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

Size of the issue – Muthoot Finance plans to raise Rs. 1,400 crore from this issue, Rs. 1,300 crore by issuing its Secured NCDs and Rs. 100 crore by issuing its Unsecured NCDs. Base size of the issue is Rs. 200 crore and the company will have the option to retain oversubscription to the tune of Rs. 1,400 crore, including the green shoe option of Rs. 1,200 crore.

Coupon Rates – As interest rates have been falling with most of the fixed income investments, like fixed deposits, company deposits, NCDs etc., Muthoot has also decided to reduce its interest rates across maturities. These NCDs will carry coupon rates in the range of 8.25% for 400 days to 9.25% for 36-60 months. Series I-X will all be Secured NCDs and Series XI will have Unsecured NCDs.

Double your Money Option – Series XI NCDs will offer cumulative interest option and will earn you a 100% return on your investment in a period of 8 years or 96 months. It would translate to an effective yield of 9.06% per annum. But, NCDs issued under this option are ‘Unsecured’ in nature, thus carry a slightly higher risk than Secured NCDs.

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

Coupon Rates for Institutional Investors – Institutional investors will get 0.25% lower rate of interest on their investments with Secured NCDs and 0.15% lower for Unsecured NCDs.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and as always, 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. 280 crore

Category II – Non-Institutional Investors & Corporates – 10% of the issue is reserved i.e. Rs. 140 crore

Category III – Individual Investors, including HUFs – 70% of the issue is reserved i.e. Rs. 980 crore

NCDs will be allotted on a first-come first-served basis in all these categories.

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. All these NCDs are ‘Secured’ in nature, except NCDs issued under option XI which offer to double your money in 96 months.

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.

Listing on BSE – Muthoot has also decided to list its NCDs 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.

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.

Minimum Investment – Minimum investment in this issue has been fixed at Rs. 10,000 i.e. 10 NCDs of face value Rs. 1,000 each.

Should you invest in Muthoot Finance NCDs?

Muthoot Finance is a prominent name in the business of gold financing. But, a strong US economy, a stronger dollar against most global currencies, falling gold prices, falling interest rates here in India, competition heating up among lenders here and demonetisation, all these factors make me believe that business environment will be tougher for the gold financing companies going ahead.

Moreover, gold finance business is relatively riskier as compared to the housing finance business. NCD issues by DHFL, Indiabulls Housing Finance and Reliance Home Finance carried interest rates in a similar range as Muthoot is offering. So, if I have to invest my money with Muthoot, I would seek a higher return as compared to the rates it is offering in this issue of NCDs. I think conservative investors should give this issue a miss and wait for some better issues to invest their money.

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 +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

India’s biggest public sector bank, State Bank of India, has given a new year gift to thousands of its borrowers on Sunday by cutting its 1-year MCLR rate by 0.90% from 8.65% to 7.75%. This move by SBI has resulted in a slew of rate cut announcements by public sector banks, which should be followed by private sector banks taking such decisions very soon. Reducing lending rates with such steep cuts is the need of the hour as banks are flushed with unprecedented  liquidity and our economy needs cheaper loans to keep itself growing in these toughest of the times.

Unfortunately, lower interest rate environment results in a fall in deposit rates as well and that has been the case with most of the fixed income investments, including fixed deposits (FDs) and non-convertible debentures (NCDs). One such NCD issue is getting launched from today and the company that is launching this issue is SREI Equipment Finance Limited.

Let us take a look at the salient features of this issue.

Size & Objective of the Issue – Base size of this issue is Rs. 250 crore, with the green-shoe option to retain an additional Rs. 250 crore, thus making it a Rs. 500 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.12% p.a. payable monthly and 9.50% p.a. payable annually or cumulative for a period of 3 years (36 months) and 9.35% p.a. payable monthly and 9.75% p.a. payable annually or cumulative for a period of 5 years (60 months). There is one more option of 400 days which carries an effective annual yield of 8.81%.

Minimum Investment – Investors need to apply for a minimum of ten bonds in this issue with face value Rs. 1,000 each i.e. 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. 150 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 100 crore

Category III – Individual & HUF Investors – 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 – Brickwork Ratings has rated this issue as ‘AA+’ and SMERA has rated it as ‘AA’, with ‘Stable’ outlook by both the rating agencies. Debt instruments with such a rating are considered to have high degree of safety regarding timely payment of interest and principal. Moreover, these NCDs 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 secured assets of the company.

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 if NCDs are held in demat form.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors 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 Equipment Finance NCDs?

SREI Equipment Finance Limited (SEFL) is a wholly-owned subsidiary of SREI Infrastructure Finance Limited (SIFL) which is a listed company on the BSE and NSE and came up with its own issue of NCDs in September this year. Below pasted is the table having issue details, NSE scrip codes and last traded prices of those NCDs.

As on March 31, 2016, the parent company SREI Infra carried net worth of Rs. 3,539 crore, while SEFL had a net worth of Rs. 2,322 crore. SIFL reported Gross NPAs of 4.02% and Net NPAs of 3.09%, while SEFL’s asset quality was relatively better at 2.95% of Gross NPAs and 1.99% of Net NPAs.

SREI Infra reported a profit of Rs. 61.53 crore on a turnover of Rs. 2,862 crore, while SEFL earned profits of Rs. 115.26 crore with revenues from operations of Rs. 2,614 crore. So, the operational performance of these companies favour SREI Equipment Finance over its parent company SREI Infra and probably that is why Brickwork Ratings has assigned it ‘AA+’ rating to the issue.

However, I think retail investors would do well to either avoid this issue or invest a maximum of 10% of their investible surplus in order to have a high interest rate investment in their portfolio in a falling interest rate scenario. Investors can also consider investing in already listed NCDs of SREI Infra or some other company from the markets at a better yield. Investors in the 30% or 20% tax bracket should avoid such taxable NCDs.

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 Limited (SEFL) 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

Demonetisation has resulted in a flood of liquidity in the Indian banking system and nobody is able to decide when to channelise such excess liquidity in a scenario where there is no demand for money for any new project and even for the existing ones. Banks and lending institutions are struggling to find takers for their loans as the prospective borrowers are also struggling to see any light at the end of this long and uncertain tunnel. But, as we know all bad times end with good times, this period of bad time will also pass away very soon.

Amidst this uncertainty, Reliance Home Finance Limited, a subsidiary of ADAG group’s Reliance Capital Limited, is coming out with its issue of non-convertible debentures (NCDs) from today. The company is offering interest rates in the range of 8.90% to 9.40% to the individual investors, for an investment period of 3 to 15 years.

The company plans to raise Rs. 3,500 crore in this issue and it is scheduled to close on January 6, 2017.

Here are some of the salient features of this issue:

Size & Objective of the Issue – The company plans to raise Rs. 3,500 crore from this issue, including the green shoe option of Rs. 2,500 crore. The company plans to use at least 75% of the issue proceeds for its lending and financing activities and to repay interest and principal of its existing borrowings and a maximum of 25% of the issue proceeds for other general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry a coupon rate of 8.90% p.a. for a period of 3 years (36 months), 9.05% p.a. for 5 years (60 months), 9.15% p.a. for 10 years (120 months) and 9.40% p.a. for 15 years (180 months). Interest will be paid on an annual basis and there is no option to get interest on a monthly or cumulative basis.

Call Option – It should be noted here that RHFL will have the right to call back Series IV NCDs at the end of 10 years from the date of issuance. The company will primarily do so if interest rates fall from here and it is able to raise money cheaply 10 years from now. However, if the company decides not to exercise its call option, then it will pay an additional 0.25% to the investors over and above the annual rate of 9.40% i.e. 9.65% after 10 years from its issue date.

Premature Withdrawal, Put Option – Investors in these NCDs will have no right to surrender these bonds back to the company for premature redemption as there is no ‘Put’ option embedded with these NCDs. However, if taken in demat form, the investors can always sell these NCDs on the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE).

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) – 30% of the issue i.e. Rs. 1,050 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 350 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 1,050 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 1,050 crore

Allotment on First-Come First-Served (FCFS) 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 the ‘Secured’ NCDs of this issue as ‘AA+’ with a ‘Stable’ outlook. ‘AA+’ rated debt instruments are considered to be highly safe from credit default point of view. Series I, II and III NCDs are ‘Secured’ in nature for which the investors will carry a right on certain assets of RHFL in case of any major financial trouble for the company. However, Series IV NCDs are ‘Unsecured’ in nature and have been rated ‘AA’ by these credit rating agencies.

To compensate the investors of Unsecured NCDs, RHFL is offering a marginally higher rate of interest i.e. 0.25% additional coupon rate, over and above 9.15% for 10 years with Secured NCDs.

Listing – These NCDs will be listed on both the stock exchanges i.e. NSE as well as BSE. The listing will take place within 12 working days from the date the issue gets closed.

Demat, Physical Application – Investors can apply for these NCDs either in demat form or physical or certificate form as it is not mandatory to have a demat account to invest in these NCDs.

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 Reliance Home Finance Limited (RHFL) NCDs?

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

With the entry of so many big and small players, housing finance space has become very competitive now and Reliance Home Finance has not been a very prominent name in this space. The company itself knows it and that is why it does not focus on low margin home loans segment. Rather it focuses on loan against property (LAP) and construction finance and that too, primarily to that segment of borrowers who do not get loans easily from big and rather conservative players like HDFC, LIC Housing Finance etc.

With demonetisation, it is widely expected that real estate industry will have a really tough time for a period of 6-12 months at least. A considerable slowdown in this market will have a really bad impact on the real estate finance companies, especially companies like Reliance Home Finance which are focusing on self-employed borrowers and miscellaneous segments of our real estate market.

However, with dwindling fixed income investment options and volatile interest rate scenario, investors are finding 9%+ interest rate options to be attractive. Investors, who are not in the 20-30% tax bracket and/or those who want to remain invested in these NCDs for a medium to long term period, can consider investing in these NCDs. Investors, who seek listing gains or capital appreciation due to an expected fall in interest rates going forward, should avoid these NCDs as I think there is a very limited scope of any such outcome.

Application Form – Reliance Home 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 Reliance Home Finance Limited (RHFL) 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

Stock markets are trading expensive as there is a liquidity gush right now. However, no bad news is good news for the stock markets these days. Investors have no option but to take risks and invest in stock markets as all other asset classes seem unattractive at this point in time. But, is the future as bright as it seems to be? That is something nobody knows with certainty.

US markets celebrate every bad news for their economy these days as they want US Fed to stretch its rate hike trajectory as much as possible. They fear that a faster pace of rate hikes would make people to shift their money from stocks to bonds. But, I think bad macroeconomic scenario presents a gloomy picture for the stock markets in the medium to long term and it is not something which should be celebrated. If the current economic environment demands a rate hike, then it is better to do it sooner than postpone it due to some political compulsions.

However, to avoid risks and have a consistent stream of cash flows, investors prefer safer options like fixed deposits, post office schemes, bonds or non-convertible debentures (NCDs) and one such issue will be available for subscription from 15th September. Indiabulls Housing Finance Limited (IHFL) is launching its NCDs issue of Rs. 7,000 crore which carries interest rate in the range of 8.65% to 9.15%.

You will have the option to invest for an investment horizon of 3 years, 5 years and 10 years and it will carry monthly interest option as well if you keep money with them for the next 10 years.

Here are some of the salient features of this issue:

Size & Objective of the Issue – The company plans to raise Rs. 7,000 crore from this issue, including the green shoe option of Rs. 3,500 crore. The company plans to use at least 75% of the issue proceeds for its lending and financing activities and to repay interest and principal of its existing borrowings and a maximum of 25% of the issue proceeds for other general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.20% p.a. for a period of 3 years (36 months), 9.25% p.a. for 5 years (60 months) and 9.30% p.a. for 10 years (120 months). Investors will have the option to receive interest on a monthly, annual or cumulative basis.

Additional 0.10% for Senior Citizens – IHFL will credit an additional 0.10% per annum to senior citizens who fall in Category IV i.e. who invest Rs. 10 lakh or less. This additional interest will be paid to those senior citizens whose name appear in the books as the bondholders on the Record Date. Such investors need to submit their self-attested copy of PAN as an additional KYC document irrespective of the mode of application, demat as well as physical.

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. 1,400 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 1,400 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 2,100 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 2,100 crore

Allotment on First-Come First-Served (FCFS) and 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. ‘AAA’ rated debt instruments are considered to be the safest from credit default point of view. Series I-VII NCDs are ‘Secured’ in nature for which the investors have the right on certain assets of IHFL in case of any financial trouble. However, Series VIII-X NCDs are ‘Unsecured’ in nature and carry a marginally higher rate of interest with a difference of 0.15%.

Listing, Premature Withdrawal & Put/Call Option – IHFL 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 from the date the issue gets closed. There is no option to surrender these bonds back to the company for premature redemption as there is no ‘Put’ option embedded in the offer. However, if taken in demat form, the investors can always sell these bonds on the BSE or NSE.

Demat, Physical Application – Investors can apply for these NCDs either in demat form or physical or certificate form as it is not mandatory have a demat account to invest in these NCDs.

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 Indiabulls Housing Finance Limited (IHFL) NCDs?

With interest rates falling and demand for such NCDs rising, issuers are leaving no opportunities to trim down the interest rates on offer. Indiabulls Housing is offering interest rates which are lower than the rates DHFL offered last month. However, I think it is justified for IHFL to offer lower rates than DHFL as it is a bigger company with sound fundamentals and carries a better brand name as well.

But, that doesn’t make these NCDs attractive to me. I think these coupon rates are lower for me to invest with a private company and I would rather invest in tax-free bonds or debt mutual funds. However, the investors, who are not liable to pay any tax on their annual income or who fall in the 10% tax bracket, can consider investing in these NCDs. Also, if you think interest rates will fall further from here, even then it makes sense to invest in such NCDs as it will result in a capital appreciation of these NCDs.

Application Form – IHFL 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 Housing Finance Limited (IHFL) 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

Markets are often driven by sentiment and there is a slump in the real estate market these days due to negative sentiment. There is a drastic fall in the number of sale-purchase transactions which has resulted in an overdue price correction and squeezed the liquidity from this market. The same liquidity seems to be flowing now to equity and debt markets. Such high levels of liquidity flows have resulted in stock markets and bond prices to touch their 52-week highs.

Encouraged by super demand for two back to back NCD issues of DHFL, SREI Infrastructure Finance Limited is coming out with its issue of non-convertible debentures (NCDs) from this Wednesday, September 7. The issue is scheduled to remain open for three weeks to get closed on September 28.

Size & Objective of the Issue – Base size of this issue is Rs. 250 crore, with the green-shoe option to retain an additional Rs. 750 crore, 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 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 coupon rate of 9.35% p.a. payable monthly and 9.75% p.a. payable annually or cumulative for a period of 3 years (36 months) and 9.60% p.a. payable monthly and 10% p.a. payable annually or cumulative for a period of 5 years (60 months). There is one more option of 400 days which offers an effective annual yield of 9.08%.

Minimum Investment – Investors need to apply for a minimum of ten bonds in this issue with face value Rs. 1,000 each i.e. 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 – Individual & HUF Investors – 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 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 – Brickwork Ratings 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. Moreover, these NCDs 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 secured assets of SREI Infra.

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 if NCDs are held in demat form.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors 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 these NCDs?

SREI Infra had its last NCD issue in July 2015. Below pasted is the table having issue details, BSE scrip codes and last traded prices of those NCDs.

SREI Infra NCDs always carry low volumes and that is why it is very difficult to calculate its relevant yield to maturity (YTM) for the interested investors. But, If I were to invest in SREI Infra’s NCDs, I would have bought them from the secondary markets as I think it is possible to invest in these NCDs at a YTM between 10.50% and 11.50%. Its current issue offers coupon rates between 9.35% and 10% which are not attractive for me to invest. However, conservative investors, who are not liable to pay any tax or fall in the 10% tax bracket or who trust SREI Infra’s management, can consider investing in these NCDs.

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

In the absence of any fresh supply of tax-free bonds, investors are lapping up non-convertible debentures (NCDs) like never before. In its last issue in the first week of August, DHFL (Dewan Housing Finance Limited) received applications worth Rs. 18,651 crore as against Rs. 4,000 crore worth of NCDs on offer. Nobody, including the management of DHFL, expected such a huge demand which poured in from all categories of investors.

To capitalise on such a big appetite for debt instruments and an abundant liquidity in the system, DHFL is bringing one more issue of its NCDs from the coming Monday i.e. 29th August. The investors will be offered a slightly lower rate of interest between 9.10% to 9.25% for a period of 3 years, 5 years and 7 years.

Issue Closing Date – September 12 is the official date of this issue getting closed. But, if you want to invest in these NCDs, you should not wait for this date as the issue is not likely to remain open for that long. Going by the response DHFL NCDs got in its first issue, I don’t think it should remain open for more than 5 working days.

Issue Size – After getting a bumper response to its previous issue of Rs. 4,000 crore, DHFL is overwhelmed and does not want to miss the opportunity to cash in on this craze for its NCDs. So, the company has decided to launch an even bigger issue of Rs. 10,000 crore this time around. Base size of the issue is Rs. 2,000 crore and there is a green shoe option to retain Rs. 8,000 crore more.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.10% p.a. for an investment period of 3 years (36 months), 9.20% p.a. for 5 years (60 months) and 9.25% p.a. for 7 years (84 months). Interest will be paid compulsorily on an annual basis every year. Monthly interest and cumulative interest options are not there this time around.

Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have rated this issue as ‘AAA’ with a ‘Stable’ outlook. ‘AAA’ rated debt instruments are considered to be the safest from credit default point of view. Moreover, these NCDs are ‘Secured’ in nature and investors with such secured NCDs have the right on certain assets of the issuer in case of any financial trouble for the company.

Objective of the Issue – DHFL 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 be allocated NCDs as per the percentages fixed for them:

Category I – Qualified Institutional Bidders (QIBs) – 30% of the issue i.e. Rs. 3,000 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 1,000 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 3,000 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 3,000 crore

Allotment on First-Come-First-Served (FCFS) Basis – Subject to the allocation ratio, allotment will be made on a first-come-first-served basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.

NRIs Not Eligible – Like its previous issue, non-resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

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. Moreover, the issue does not carry ‘Call’ option for DHFL or ‘Put’ option for the investors. However, as these NCDs get listed on the stock exchanges, the investors will have the option to sell them on the exchanges anytime they want.

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

TDS – Though the interest earned is taxable with these NCDs, DHFL will not deduct any TDS on the NCDs held in a demat form. The investor will have to pay tax on the interest income while filing his/her income tax return.

Should you invest in this issue?

Investors investing just for listing gains were left disappointed when these NCDs from its previous issue got listed at a discount to their face value of Rs. 1,000. Going by such a listing, investors should not expect listing gains from these NCDs too. Interest rates for this issue have been fixed at 9.10% for 3 years as against 9.20%, 9.15% for 5 years as against 9.25% and 9.25% for 7 years as against 9.30% for 10 years. These lower rates will make sure that these NCDs will not list at a significantly higher price as compared to their issue price of Rs. 1,000.

DHFL NCDs trading on the BSE and NSE

As I mentioned earlier as well, periods of making easy money in the bond markets seems to be over now. Bond yields have fallen sharply in the last 6-9 months, but they are showing signs of stabilisation. It seems debt investments would yield lower returns for the next 2-3 years. In the absence of any significant adverse event, I think 10-year G-Sec yield should remain in the range of 6.90% to 7.40% for the remainder of this calendar year. If that happens, it would be termed as a very passive period for bond trading. In such a scenario, you should not expect any significant price movement in your bond holdings too.

These NCDs are for those investors who want to have higher returns as compared to bank fixed deposits (FDs) or fall in the lower tax brackets of 10% or do not pay tax at all. Investors in the higher tax bracket of 20% or above should avoid these taxable NCDs and explore tax-free bonds or other tax-efficient investments.

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. For bidding of your application, any further info or to invest in DHFL NCDs, you can reach 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 the successful issue of Edelweiss Housing Finance Limited (EHFL), DHFL, or Dewan Housing Finance Limited, is coming out with its issue of Non-Convertible Debentures (NCDs) from the coming Wednesday i.e. August 3, 2016. These NCDs will carry coupon rates in the range of 8.83% to 9.30%, resulting in an effective yield of 9.20% to 9.30% for the individual investors.

Though the issue is scheduled to close on August 16, it is likely that it will get oversubscribed prior to its closing date. Given a bumper response to the Edelweiss Housing Finance NCDs issue, there should be a reasonably high demand for this issue as well.

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

Size & Objective of the Issue – The company plans to raise Rs. 4,000 crore from this issue, including the green shoe option of Rs. 3,000 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 9.20% p.a. for a period of 3 years (36 months), 9.25% p.a. for 5 years (60 months) and 9.30% p.a. for 10 years (120 months). Investors will have the option to receive interest on a monthly, annual or cumulative basis.

CPI Linked Floating Interest Rate NCDs – This is the most unique feature of this issue. The company has decided to offer CPI-linked floating interest rate to its Series X NCD investors and there will be a ‘Floor’ as well as a ‘Cap’ on the interest rate. Floor has been set at 8.90% p.a. and Cap at 9.50% p.a. The specified spread will be 4.18% p.a. for Category III & Category IV investors. For the first year, reference CPI has got calculated at 5.02% p.a., so it is 5.02% + 4.18% = 9.20%.

Suppose, we have 4.72% as the reference CPI for the next year. In that case, the rate of interest will be 8.90% for the second year.

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 – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 800 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 800 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 1,200 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 1,200 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first served (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.

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 bonds on the exchanges.

Demat, Physical Application – Demat account is not mandatory to invest in these NCDs as the investors 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 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?

In 2013-14, when G-Sec yield was ruling above 9%, investors were scared to invest in debt securities due to negative returns on their investments. With falling yields on Government Securities (G-Secs) and corporate bonds, interest rates on various investment products like fixed deposits (FDs), post office small saving schemes, non-convertible debentures (NCDs) and tax-free bonds have all fallen by 1% to 2.5% in the last two years or so.

Now, with a fall in bond yields and 15-20% appreciation in bond prices, investors are chasing theses debt investments. But, I think that period of making easy money is over now and it would be very difficult for us to have similar returns going forward. Investors should not expect returns in double digits now on.

That being said, these rates of 9.20% to 9.30% do not attract me much, despite the issue being rated as ‘AAA’ by the rating agencies. I would rather prefer SBI NCDs yielding ~8.50% or Tax-Free Bonds yielding ~7% or equity mutual funds earning an average annual return of 15% or so. Conservative investors should avoid these NCDs and explore other options like post office saving schemes, tax-free bonds, debt mutual funds or other listed NCDs.

Investors, who are not required to pay any tax on their annual taxable income or who fall in the 10% tax bracket or who have high degree of confidence in the execution capabilities of DHFL’s management, can consider investing in these NCDs for a period of 3 years or at max 5 years. I personally avoid longer term investment periods with private companies, so would advise my clients too to avoid the 10-year option in this case.

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. For bidding of your application, any further info or to invest in DHFL NCDs, you can reach 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

Edelweiss Housing Finance Limited (EHFL), a subsidiary of Rashesh Shah’s Edelweiss Group, is launching its public issue of secured and redeemable non-convertible debentures (NCDs) from tomorrow, July 8th. The issue will carry a maximum of 10% coupon rate with monthly, annual and cumulative interest payment options and tenors of 36 months, 60 months and 120 months.

The issue is scheduled to close on July 27th. However, I think it should get oversubscribed in a day or two due to high demand. Let us check other salient features of this issue.

Size & Objective of the Issue – The company 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 issue will carry coupon rate of 9.50% p.a. for a period of 36 months (3 years), 9.75% p.a. for 60 months (5 years) and 10% p.a. for 120 months (10 years).

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

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 100 crore

Category III – Individual & HUF Investors – 60% of the issue i.e. Rs. 300 crore

Allotment will be made on a first-come-first-served basis.

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 ICRA have rated this issue as ‘AA’ with a ‘Stable’ outlook, while Brickwork Ratings has assigned it AA+ (Stable) rating. As mentioned above, 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 bonds on the exchanges.

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

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.

About EHFL & Its Financials

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

Edelweiss Housing Finance Limited (EHFL) is a non deposit taking housing finance company offering financing of various sort to individuals and corporates. Edelweiss Financial Service Limited and Edelweiss Commodity Services Limited are the promoters of EHFL and hold 22.39% and 77.61% stake respectively. EHFL offers home loans – 37% of loan book, loan against property – 26% of loan book, construction finance 20% of loan book and rural finance – 16% of loan book.

Should you invest in these NCDs?

Interest rates of 9.50% to 10% from a private company don’t attract me much. It will take 10 years for these NCDs to provide me approximately 160% return. I would rather invest in good quality stocks than take risk with these kind of NCDs. I think investing in diversified equity mutual funds will generate much higher returns in the long term than these NCDs. Moreover, the interest earned is taxable, which reduces our after-tax returns.

However, these NCDs are still suitable to those investors who are not liable to pay any tax or fall in the 10% tax bracket. Also, I would suggest investors to go for either 36 months option or 60 months option. Investing for a period of 120 months (10 years) with a private company becomes risky sometimes. Risk-averse investors, falling in 20% or 30% tax bracket, should invest in debt funds or tax-free bonds for medium to long term.

Application Form of EHFL 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 EHFL NCDs, you can reach us at +919811797407