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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

Indiabulls Consumer Finance 11% 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

Indiabulls Consumer Finance Limited (ICFL) is launching its public issue of non-convertible debentures (NCDs) from Monday, 4th of February. The company wants to raise Rs. 3,000 crore from this issue, including the green-shoe option of Rs. 2,750 crore. These NCDs will carry interest rates in the range of 10.40% for 38 months and 11% for 60 months.

The issue is scheduled to close on March 4, unless the company decides to close the issue prematurely. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CARE.

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

Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 2,750 crore, making the total issue size to be 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.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 11% p.a. for a period of 60 months, 10.90% p.a. for 38 months and 10.75% p.a. for 26 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available with 38 months and 60 months, and coupon rates for these periods are 10.40% p.a. and 10.50% p.a. respectively.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, 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 need to sign on the application form as per your bank records.

Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CARE has rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, these NCDs are ‘Secured’ in nature.

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

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

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

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 600 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 900 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 900 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.

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 get listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchanges (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 the stock exchanges.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.

No TDS in Demat Form – Interest income with such 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.

Should you invest in Indiabulls Consumer Finance NCDs?

I’ll update this post soon.

Application Form of Indiabulls Consumer Finance NCDs

Manappuram Finance Limited 10.15% NCDs – January 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

Manappuram Finance Limited (MFL) is launching its public issue of non-convertible debentures (NCDs) from today, 28th of January. The company wants to raise Rs. 737 crore from this issue, including the green-shoe option of Rs. 587 crore, and is offering interest rate in the range of 9.35% for 36 months and 10.15% for 60 months.

The issue is scheduled to close on February 27, unless the company decides to close the issue prematurely. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CARE.

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

Size & Objective of the Issue – Base size of the issue is Rs. 150 crore, with an option to retain oversubscription of an additional Rs. 587 crore, making the total issue size to be Rs. 737 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.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 10.15% p.a. for a period of 60 months and 9.75% p.a. for 36 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available with these tenors, and coupon rates for these periods are 9.75% p.a. and 9.35% p.a. respectively. There is one more option of 2,617 days investment period, which doubles your money in this period.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, 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 need to sign on the application form as per your bank records.

Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CARE has rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, these NCDs are ‘Secured’ in nature.

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

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

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 73.7 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 147.4 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 221.1 crore

Category IV – Resident Indian Individuals including HUFs – 50% of the issue is reserved i.e. Rs. 368.5 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.

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 get listed only on the Bombay Stock Exchange (BSE). 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 the stock exchange.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.

No TDS in Demat Form – Interest income with such 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.

Should you invest in Manappuram Finance NCDs?

Financial results announced by both the gold-financiers, Manappuram Finance and Muthoot Finance, were healthy in the previous quarter. So, from the fundamentals point of view, Manappuram Finance is doing well and it seems there is no immediate threat to its business model as of now.

Moreover, with global crude prices falling more than 30% from its peak of 2018, Indian rupee has strengthened and bond yields have corrected very sharply. Following such a sharp correction in bond yields, debt issuers are also reducing their interest rates on NCDs. Interest rates offered by Manappuram in this issue are 0.25% lower than the interest rates offered in its previous issue of October 2018.

Liquidity concerns of NBFCs have also eased somewhat, but the crisis has resulted in a slowdown in disbursements of loans and business growth. It is yet to be seen whether these companies are able to avoid this crisis completely or not. So, till the time you are confident that the crisis is over, and these NBFCs will have better time in the days to come, I think you should either avoid such NCDs or invest in a diversified manner.

Application Form of Manappuram 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 Manappuram NCDs, you can contact us at +91-9811797407

Tips to Keep in Mind While Investing in an IPO

In the first half of 2018, nearly two out of five Indian companies that made their initial public offering delivered positive returns. This came with a 27% leap in the number of deals when compared to the same period in 2017. And, in the first six months of 2018, IPO deals raised a record $3.9 billion.

What is an IPO?

An Initial Public Offering (IPO) represents the sale of shares by a company to the public for the first time, i.e., an unlisted company selling a portion of its shares to the public for raising funds (referred to as a ‘public issue’) and thereby becoming a company that is listed and tradable on the stock exchanges.

When the company needs more funds or additional capital, it can raise the same through debt or equity. In the case of IPO, the firm raises money as equity and thereby a portion of the ownership is now transferred to the public.

India has seen a fair amount of IPO activity this year.But the real questions are – which IPOs are really worth investing in, and what factors should you keep in mind before investing in an IPO?

Understand the Company and the Valuations

Take a good look at the company, the nature of the business, its track record, the management, the competition, and its business outlook. A company in the growth stage may offer more potential for long-term capital appreciation. This information is usually available in the company’s ‘red herring prospectus’ which is a document that contains information about the issuer (the company offering shares for public subscription). The valuation of the company and the attractiveness of the IPO price band can be analyzed by reviewing the financials of the company, referring research reports, or by comparing with the valuation ratios of similar companies in the market. This will help in understanding if the IPO is over-priced, under-priced, or fairly-priced, and give you a holistic view of the company’s prospects.

Study the Utilization of IPO Proceeds

Firms may raise capital for several purposes, such as expanding to new markets, research, and development, for paying off debt, and many others. Usually, those that are pursuing growth strategies offer a better bet for gains from an IPO perspective.

Look for Over-Subscription in the Right Place

Valuing the company, even by comparing ratios with those of peers, is easier said than done. IPO subscription is a factor of demand and supply as well. Over and above the general market buzz or news, a more reliable way to try and understand the demand for the IPO is to look at the over/under-subscription in the other non-retail segments, i.e., in the Qualified Institutional Buyer (QIB) category and the Non-Institutional Investors (NII) segment. If there is over-subscription in these segments, it means the demand for the IPO is high.

Look at the Investment (IPO) Grading

In addition to referring to the prospectus, demand, and other aspects, it would be prudent to study the grading for IPOs that credit rating agencies have to offer. An IPO grading of ‘4’ and above may possibly be a better choice.

Understand the Allotment Process

The IPO book building process is usually run by investment banks who serve as underwriters for the issue. IPOs can be subscribed only in lots (multiple of shares). For instance,one lot of 40 shares, or one lot of 13 shares, and so on, at a particular price band, say Rs. 150 to Rs. 165, or Rs. 1,200 to Rs. 1,298, and so on (these are just representative examples and can vary widely from issue to issue).

The rules of allotment for each category are different. For RII (retail industrial investors), if there is an under-subscription in the retail segment, the investor is offered the number of lots he has subscribed. If there is an over-subscription, then the maximum allotment can be only one lot, arrived at by a draw of lots (out of the total unique retail investor accounts) that have subscribed to the issue at or above the final price that has been arrived at by a book building process.

If you think there is potential for over-subscription, the best way to increase chances of allotment is to subscribe at the upper end of the price band, or preferably at the cut-off price, and also apply from multiple legitimate demat accounts that you may hold with family members or others.

A simple tip is to invest at the cut-off price, which indicates your consent to pay whatever is the final price arrived at within the price band. The process varies for NIIs and QIBs, where the allotment is based on the proportion of shares applied for in the case of over-subscription. Some firms also offer to fund for subscribing to IPOs, also referred to as IPO funding.

Be Clear Why You are Investing in an IPO

You should be clear of your intent behind investing in IPOs – is it for quick gains on account of potential initial upside, i.e., listing premiums, or is it for the long-term? This will determine whether you sell on listing or you hold for the long-term. Another option is to hold and watch what company insiders do after the lock-in period of an IPO and plan accordingly.

Keep an Eye on the Details in Forms

It is essential to read and fill IPO forms in detail and correctly. That will ensure your forms do not get rejected, and that you are issued the right refunds and so on. It is also advisable that you go with a reliable broker.

Conclusion

We have discussed at length the key factors to keep in mind while subscribing to an IPO. That said, be aware of the key risks in this process.

You are ultimately investing in a company and all associated market risks apply. Further, there are risks where the IPO may not be fully subscribed which may entail a dip in the share price as compared to the price band. There is also the risk that the IPO maybe over-subscribed and you may not be allotted shares. There could always be other investment avenues than IPOs which may offer higher returns. Also note that these shares will always be available in the secondary market, so there may also be no need to rush to subscribe.

IPOs are yet another investment opportunity that let you participate in a company’s growth story, or help profit through capital gains in potential listing premiums. All of this comes with its own set of risks and influential factors. Happy investing!

Author Bio: Niyati Jetly is business development manager and evangelist at CIEL – Centre for Investment Education and Learning. To get grounded in IPO funding and investing, you may consider enrolling in quick online courses developed by CIEL.

India Infoline Finance Limited (IIFL) 10.50% NCDs – January 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

India Infoline Finance Limited (IIFL) is coming out with its public issue of non-convertible debentures (NCDs) from tomorrow, 22nd of January. The company wants to raise Rs. 2,000 crore from this issue, including the green-shoe option of Rs. 1,750 crore, and is offering interest rate in the range of 9.60% for 39 months and 10.50% for 120 months.

The issue is scheduled to close on February 20, unless the company decides to close the issue prematurely as it is able to raise the desired amount before the scheduled closing date. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CRISIL and ICRA.

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

Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 1,750 crore, making the total issue size to be Rs. 2,000 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.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 10.50% p.a. for a period of 120 months, 10.20% p.a. for 60 months and 9.60% p.a. for 39 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 tenors, and coupon rates for these periods will be 10% p.a. and 9.75% p.a. respectively, interest payable on a monthly basis.

Credit Rating & Nature of NCDs – CRISIL, ICRA and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CRISIL and ICRA have rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, 39-month and 60-month NCDs are ‘Secured’ in nature, whereas 120-month NCDs are ‘Unsecured’ in nature.

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

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

Category I – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 400 crore

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

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 600 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 600 crore

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.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.

Should you invest in India Infoline Finance Limited (IIFL) NCDs?

As there was no fresh flow of bad news from the domestic markets, as well as from the global front, market sentiment has improved somewhat in the last 15 days or so. But, is it some kind of calm before the storm? Nobody knows with certainty. But, one thing I am very confident of, like 2018, 2019 will also have high volatility in both equity, as well as the bond markets. US-China trade war, slowdown of economic growth both in China, as well as the US, India’s twin deficit problem and the crucial general elections here in India, all these are very important events to be closely monitored, and will play a very crucial role in market movement going ahead.

But, as far as the NBFCs’ liquidity crisis is concerned, I think the situation was not as bad as it was made out to be and it should improve going forward. RBI is taking all measures possible to defy the crisis, and easing global crude prices has also worked in allaying the fear among the investors.

As far as this issue is concerned, I think the interest rate for the 39-month option is low for my expectations, and 120-month investment period is too long a period to for my investments with a private company. So, if I were to invest in this issue, I would have opted for the monthly interest option of 60-month investment period, i.e. Series III. I don’t know when the NHAI is going to launch its public issue of taxable bonds, but I would advise the conservative investors to wait for it, as it makes more sense to invest in debt securities of government companies as compared to the private companies.

Application Form of India Infoline Finance Limited NCDs

Shriram Transport Finance 9.70% NCDs – January 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

Shriram Transport Finance Company Limited (STFCL) is launching its public issue of non-convertible debentures (NCDs) from today, January 7, 2019. This will be the third public issue of NCDs by the company this financial year. The company plans to raise Rs. 700 crore from this issue, including the green shoe option of Rs. 500 crore.

These NCDs will carry coupon rates in the range of 9.12% per annum to 9.70% per annum, resulting in an effective yield of 9.39% p.a. to 9.70% p.a. for the investors. The issue is scheduled to close on January 31, unless the company decides to foreclose it.

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

Size & Objective of the Issue – Base size of the issue is Rs. 200 crore, with an option to retain oversubscription of an additional Rs. 500 crore, making the total issue size to be Rs. 700 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 9.70% p.a. for a period of 10 years, 9.50% p.a. for 5 years and 9.40% p.a. for 3 years. These interest rates would be applicable for annual interest rate options only. Monthly interest payment option is also available for 5 years and 10 years, with coupon rates of 9.12% p.a. and 9.30% p.a. respectively. For 3 years and 5 years, cumulative interest payment option is also there, with an effective yield of 9.40% and 9.50% respectively.

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

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 70 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 70 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 280 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 280 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.

Credit Rating & Nature of NCDs – CRISIL and India Ratings have rated this issue as ‘AA+’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature.

Listing, Premature Withdrawal – These NCDs are proposed to get listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 6 working days after the issue gets closed. The investors will not have the option to prematurely redeem these NCDs back to the company, however the investors can always sell these NCDs on any of the stock exchanges.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for these debt issues also effective October 1, 2018. So, no cheque would be required to apply for these NCDs now.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.

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. Moreover, 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.

Minimum Investment Size – The company has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.

Should you invest in Shriram Transport Finance 9.70% NCDs?

There has been a considerable volatility in the stock markets, as well as the bond markets in the past 4-5 months. Market volatility is expected to continue in 2019 as well. So, the conservative investors are advised either to avoid the equity investments at least for the next 6 months or so, or invest in equities in a phased manner.

As far as fixed income investments are concerned, I expect the interest rates to remain range bound with a downward bias for the next 6 months or so. Post that, I think it would primarily depend on two factors – one, the elections outcome in May this year, and the other, macro economic outlook for India as well as China and the US.

As mentioned above as well, this is the third public issue by Shriram Transport Finance in the current financial year. Interest rates offered by the company in this issue are exactly the same as they were in the second issue of October 2018, and slightly higher than the first issue of June 2018. Still, I find these rates to be on a lower side of my expectations from a private company. I would have liked the company to offer 10%+ coupon rate for the 3-year or 5-year investment period option. Again, as the interest rates expected to be offered by the NHAI in the range of 8.50% and 9% for a period of 5 years to 10 years, I would like to consider the NHAI issue first before committing my funds elsewhere.

Application Form of Shriram Transport Finance NCDs

Mahindra & Mahindra Financial Services 9.50% NCDs – January 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

Mahindra & Mahindra Financial Services Limited (MMFSL) is launching its public issue of non-convertible debentures (NCDs) from Friday this week, January 4, 2019. This will be the first public issue of NCDs by the company this financial year. The company plans to raise Rs. 3,500 crore from this issue, including the green shoe option of Rs. 3,000 crore.

These NCDs will carry coupon rates in the range of 9.05% to 9.50%, resulting in an effective yield of 9.07% to 9.50% for the investors. The issue is scheduled to close on January 25, unless the company decides to foreclose it.

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

Size & Objective of the Issue – Base size of the issue is Rs. 500 crore, with an option to retain oversubscription of an additional Rs. 3,000 crore, making the total issue size to be Rs. 3,500 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.50% p.a. for a period of 120 months (10 years), 9.30% p.a. for 96 months (8 years), 9.15% p.a. for 60 months (5 years) and 9.05% p.a. for 39 months (3.25 years). Interest will be paid only on an annual basis, as the company has not provided any other interest rate payment option.

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. 700 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 700 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

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 India Ratings have rated this issue as ‘AAA’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature, except Series IV NCDs, the 120-months investment period option. Series IV NCDs are ‘Unsecured’ in nature.

Listing, Premature Withdrawal – These NCDs are proposed to get listed only on the Bombay Stock Exchange (BSE). The listing will take place within 6 working days after the issue gets closed. The investors will not have the option to prematurely redeem these NCDs back to the company, however the investors can always sell these NCDs on the stock exchange.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs as the company is not providing the option to apply for these NCDs in physical or certificate form.

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

Minimum Investment Size – The company has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.

Should you invest in Mahindra & Mahindra Financial Services 9.50% NCDs?

The ongoing trade war between the US and China has resulted in a lot of volatility in the financial markets worldwide. Investors have also turned cautious with respect to the economic growth prospects of both these countries. Considering a high probability of these two major economies getting slower in 2019, interest rates are also expected to go down following some dovish measures expected to be taken by the central banks worldwide, including India.

So, it creates a base case in favour of some of the good fixed income investments yielding high returns at present. Do these NCDs fall in that category of attractive fixed income investments? I would say ‘Yes’, if you are a relatively conservative investor, and considering these NCDs are ‘AAA’ rated. As these NCDs are carrying higher interest rates as compared to the bank fixed deposits, they seem relatively attractive to invest in.

However, considering that ECL Finance and SREI Equipment Finance are offering 10%+ returns on their respective NCDs, I would say interest rates offered by Mahindra are on a lower side for my expectations. I would rather wait for the NHAI to launch its bonds issue sometime this month and announce its interest rates, which I expect should be closer to 9% for a 10-year option.

Application Form of Mahindra & Mahindra Financial Services 9.50% NCDs

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

Reliance CPSE ETF FFO 3

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

Reliance Nippon Life Asset Management Limited has launched its third issue of CPSE ETF. Called CPSE ETF Further Fund Offer (FFO) 3, the issue opened yesterday for the Anchor investors and will open today for the Non-Anchor investors, including the retail investors. The government targets to raise between Rs. 12,000 to Rs. 14,000 crore from this issue by selling its stake in the eleven constituents of the CPSE ETF.

Nifty CPSE Index – It is one of the indices of the National Stock Exchange (NSE) carrying 11 public sector undertakings (PSUs) in which the central government has more than 53% stake and these companies have more than Rs. 1,000 crore in market capitalisation. All these companies are profitable and are either Maharatnas, Navratnas or Mini Ratnas.

CPSE Index Composition as on October 31, 2018 & February 28, 2017

Features of CPSE ETF Further Fund Offer (FFO) 3

High Dividend Yield & Reasonable Valuations – All the constituents of CPSE ETF are profitable and have paid around 5.25% dividend to their investors on an average. As per the data compiled by equity analysts, high dividend yield stocks carry lower volatility in returns as compared to growth stocks. So, one can expect a relatively stable performance from these stocks. Moreover, CPSE ETF has a P/E ratio of 9.37 times and P/B ratio of 1.42 times, which as compared to some of the other indices is quite attractive.

4.5% Discount for Investors – As against 3.5% discount the government had offered to the investors in its issue in March 2017, the discount has been increased to 4.5% to the investors of CPSE ETF this time around, probably because the issue size is 4 times bigger than the previous one. This 4.5% discount will be calculated on the “FFO 2 Reference Market Price” of the underlying shares of the Nifty CPSE Index and will be passed on to the CPSE ETF by the government of India.

Reference Market Price/NAV – CPSE ETF is currently trading at Rs. 24.24 on the stock exchanges. This is also its reference market price or NAV. As the investors get allotment and FFO units get listed on the stock exchanges, market price of each unit of this ETF will be linked to the Nifty CPSE Index and its returns would be quite close to the returns generated by the CPSE Index.

Investment Objective – The scheme intends to generate returns that closely correspond to the total returns generated by the Nifty CPSE Index, by investing in the securities which are constituents of the Nifty CPSE Index in the same proportion as in the index. However, the performance of the scheme may differ from that of the Nifty CPSE Index due to tracking error, scheme expenses and the initial discount of 4.5%.

Target Amount to be Raised – The government has fixed the base issue size to be Rs. 8,000 crore during this 4-day offer period. In case of oversubscription, the government plans to retain oversubscription to the extent of Rs. 4,000 crore to Rs. 6,000 crore. However, the government is yet to decide the final amount it would like to retain post the issue closure.

Minimum/Maximum Investment Size – Individual investors can invest in the scheme with a minimum investment amount of Rs. 5,000 and there is no upper limit on the investment amount. However, retail investors investing upto Rs. 2 lakhs will be given preference in allotment in case there is an oversubscription.

Allotment & Listing – As per the offer document, units of this ETF will get allotted and listed on the NSE and BSE within 5 business days from the closing date of the issue.

Demat Account Mandatory – Investors need to have a demat account to apply for this FFO. Applications without relevant demat account details are liable to get rejected.

Entry & Exit Load – This scheme is not subject to any entry load or any exit load.

Categories of Investors & Allocation Ratio

Anchor Investors – Maximum 30% of Rs. 8,000 crore i.e. Rs. 2,400 crore will be allocated to the anchor investors.

Retail Individual Investors – After the anchor book closure on November 27, retail individual investors are allowed to take up all of the remaining portion of this FFO i.e. Rs. 5,600 crore.

Qualified Institutional Buyers (QIBs) & Non-Institutional Investors (NIIs) – QIBs and NIIs will have nothing reserved for them in this FFO. They will be allotted units only if the subscription numbers of the retail investors and/or anchor investors fall short of their reserved quotas.

Application Form – CPSE ETF FFO 3

For any further info or to invest in the CPSE ETF FFO 3, you can contact us on +91-9811797407

NHAI Taxable Bonds – 2018 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

2018 so far has turned out to be a roller coaster year for the equity, as well as the bond markets. Mid and small cap companies have seen a massive cut in their stock prices. Portfolios have seen a massive value erosion and sentiment has once again turned negative. Market analysts, who were recommending a higher allocation to equity till early this year, have also become cautious to advise higher equity investments. Some analysts are calling it start of a bearish phase.

Debt portion of portfolios are also facing the music. Bond yields have undergone huge volatility amid dynamic economic conditions and highly uncertain borrowing programme of the government. Overall, bond yields have risen so far in 2018. However, conservative investors haven’t got the opportunity to enjoy such high rates on their fixed deposits. Fixed deposit rates are still below 8-8.5% with most of the banks. Post the IL&FS and DHFL crisis, private NBFCs are finding it difficult to raise money from the debt markets.

In such a dynamic economic environment, as the investors want to opt for safer investment options, NHAI is soon coming up with its maiden public issue of taxable bonds for the retail investors. NHAI has already filed its draft shelf prospectus with SEBI on November 16, 2018, so the issue is expected to open in the first fortnight of December.

NHAI is yet to announce the key details of the issue, like launch date, rate of interest, duration of the bonds etc. The company wants to raise Rs. 10,000 crore from this issue and plans to utilize these funds to finance its ambitious Bharatmala Project.

I’ll update this post as the company announces further details. Here you have some of the salient features of the issue.

Size of the Issue – NHAI announced its plans to raise Rs. 62,000 crore through debt issuance this financial year. It has already raised approximately Rs. 29,000 crore by issuing bonds to the institutional investors on a private placement basis. Out of the remaining Rs. 33,000 crore, the company has decided to raise Rs. 10,000 crore from this issue.

Coupon Rates on Offer – The company is yet to announce the interest rates it is going to offer in this issue. However, the market speculation is that the company will offer rates between 8.50% to 9% per annum for a period of 3 years to 10 years. I’ll update this post as the company discloses its rates.

Rating of the Issue – CRISIL, ICRA, CARE and India Ratings, all rating agencies have assigned ‘AAA’ rating to this issue. Also, these bonds are ‘Secured’ in nature i.e. in case of any default in interest payments or principal repayment at the time of maturity, the bondholders will have the right to make claim on certain assets of the company.

NRI/QFI Investment Not Allowed – Like with most such recent NCD issues, Non-Resident Indians (NRIs) will not be able to make investments in this issue. Qualified Foreign Investors (QFIs) too are not eligible to invest in this issue.

Investor Categories & Allocation Ratio – The investors have been classified in the following four categories and the company is yet to announce what percentage of the issue will be reserved for each of the categories during the allocation process:

Category I – Qualified Institutional Bidders (QIBs)

Category II – Non-Institutional Investors (NIIs)

Category III – High Net Worth Individuals, including HUFs, investing more than Rs. 10 lakhs

Category IV – Resident Indian Individuals, including HUFs, investing up to Rs. 10 lakhs

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.

Listing & Allotment – Like its previous issues, NHAI has decided to get its bondss listed on both the stock exchanges i.e. National Stock Exchange (NSE) as well as Bombay Stock Exchange (BSE). NHAI will ensure that these bonds get allotted and listed on the stock exchanges within 6 working days from the closing date of the issue.

Demat A/c. Mandatory – Off late, these companies are making it impossible to apply for such bonds in physical/certificate form, and NHAI is no different. It has also made it mandatory to have a demat account in order to apply for these bonds. However, if you get these bonds allotted in your demat account, you will have the option to rematerialise them later in physical/certificate form if you decide to close your demat account.

No Lock-In Period – These bonds do not carry any lock-in period and you can buy/sell them on the stock exchanges at the market price whenever you want.

Loan Against Bonds – These bonds can be pledged or hypothecated for obtaining loans as per the terms set by the lending company.

Minimum & Maximum Investment – Investors are required to put in a minimum investment of Rs. 10,000 in this issue i.e. at least 10 bonds of face value Rs. 1,000 each. There is no upper limit for the investors to invest in this issue. However, an investor investing more than Rs. 10 lakhs will be categorized as a high networth individual (HNI) and the probability of full allotment is lower in the HNI category.

Interest Payment Date – NHAI is yet to announce the interest payment date for these bonds.

Record Date – For the payment of interest or the maturity amount, record date will be 15 days prior to the date on which such amount is due to be payable.

JM Financial Credit Solutions 10.25% NCDs – November 2018 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

JM Financial Credit Solutions, a venture between JM Financial Limited holding 50.01% and INH Mauritius holding 48.62%, is all set to launch its second issue of Non-Convertible Debentures (NCDs) this fiscal from the coming Tuesday, November 20, 2018. These NCDs will carry coupon rates in the range of 9.67% to 10.25%, resulting in an effective yield of 10% to 10.25% for the investors.

The company plans to raise Rs. 1,250 crore from this issue, including the green shoe option of Rs. 1,000 crore. The issue is scheduled to close on December 20, unless the company decides to close the issue prematurely once it is able to raise the desired amount before the scheduled closing date.

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

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

Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 1,000 crore, making the total issue size to be Rs. 1,250 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 10.25% p.a. for a period of 120 months, 10.10% p.a. for 60 months and 10% p.a. for 42 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 tenors, and coupon rates for these periods would be 9.81% p.a. and 9.67% p.a. Respectively, interest payable on a monthly basis.

Credit Rating & Nature of NCDs – ICRA and India Ratings have rated this issue as ‘AA’ with a ‘Stable’ outlook. Moreover, these NCDs will be ‘Secured’ in nature.

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 125 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 125 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 500 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 500 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.

Listing, Premature Withdrawal – These NCDs are proposed to get listed only on the Bombay Stock Exchange (BSE). The listing will take place within 12 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on the stock exchange.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs as the company is not providing the option to apply for these NCDs in physical or certificate form.

But, in case you decide to close your demat account and keep these NCDs in a physical form, then the company will deduct TDS on the interest payable on the interest payment date. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000.

Should you invest in JM Financial Credit Solutions NCDs?

Indian NBFCs are facing their toughest of times of the last 4-5 years. Liquidity crisis has taken a toll on their fund raising plans. These NBFCs are finding it difficult to raise money even at higher interest rates. Nobody knows how long it is going to last. But, I have a view that it is not as severe as it is made out to be, and it should not last for more than 6 months.

In these tough times, JM Financial Credit Solutions has raised its interest rates on these NCDs by 50 basis points (0.50%) per annum. Though these rates look attractive as they carry 0.50% higher rate as compared to its last issue, what matters more during such tough times is the market sentiment. Investors are extremely cautious with investing their money with these NBFCs at this point in time. They are playing wait and watch game for the moment, and would require more clarity from the companies like DHFL, IL&FS, Yes Bank and others before putting their money in riskier investments. It makes sense too. Why to invest for a 1-2% extra for a year when your 100% capital could be at risk?

So, I think this is not the best of the times for the investors to take risk with their capital. They should wait for at least a month or so for the dust to settle down and state election results to pour in, and probably then decide whether to invest in safer investments for long term steady flow of regular income or take risks for a scope of higher returns in the form of capital appreciation. Investors, who still want to take a plunge in such NCDs or bonds, should explore already listed tax-free bonds of the government companies from the secondary markets.

Application Form of JM Financial 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 JM Financial NCDs, you can contact us at +91-9811797407