Here’s a new option for investors looking for fixed-income investments. Edelweiss Financial Services Limited (EFSL) has announced the public issue of Secured Redeemable Non-Convertible Debentures (NCDs) of the face value of Rs 1,000 each, amounting to Rs 2,000 million (Base Issue), with an option to retain over-subscription up to Rs 3,000 million aggregating to a total of Rs 5,000 million (Tranche I Issue).
There are ten series of NCDs carrying fixed coupon and having tenure of 24 months, 36 months, 60 months and 120 months with annual, monthly and cumulative interest option. Effective annual yield for NCDs ranges from 8.75% to 9.70% per annum, Edelweiss Financial Services said in a statement.
Edelweiss said that at least 75% of the funds raised through this Tranche I Issue will be used for the purpose of repayment /prepayment of interest and principal of existing borrowings of the Company and the balance is proposed to be utilized for general corporate purposes, subject to such utilization not exceeding 25% of the amount raised in the Tranche I Issue, in compliance with the Securities and Exchange Board of India (Issue And Listing Of Non-Convertible Securities) Regulations, 2021 (“SEBI NCS Regulations”).
An additional incentive maximum of 0.20% p.a. will be offered for all Category of Investors in the proposed Tranche I Issue, who are also holders of non-convertible debentures(s)/bond(s) previously issued by Edelweiss Financial Services Limited, and/ or its group companies, i.e. ECL Finance Limited, Edelweiss Housing Finance Limited, Edelweiss Retail Finance Limited and Edelweiss Finance & Investments Limited, as the case may be, and/or are equity shareholder(s) of EFSL as the case may be, on the deemed date of allotment, it added.
The NCDs proposed to be issued under this Tranche I Issue have been rated “CRISIL AA-/Negative” and “ACUITE AA/Negative”.
Equirus Capital Private Limited is the Lead Manager of this Tranche I Issue. The Tranche I Issue opens on December 6, 2021 and closes on December 27, 2021 with an option of early closure. The NCDs will be listed on BSE Limited to provide liquidity to the investors.
Should you invest?
NCDs are fixed-income investments that come with a coupon rate of interest. They are typically issued by private institutions. The rate of interest on NCDs is generally higher than the post office and bank fixed deposit schemes.
Also, returns from NCDs are taxable as ‘income from other sources’ in the hands of the investor. Gains from the sale of NCDs in the stock exchange are treated as “profits and gains from business” or as “capital gains”.
Some associated rate risks always exist for investors, even as NCDs are rated and considered secure. Therefore, it is always better to invest after taking into account one’s risk profile or advice from a financial advisor.