The NCDs are available for a tenure 18 months, 36 months, 60 months and 120 months, which comes with a monthly, annual and cumulative interest payout options.
Investors looking for fixed-income investments have a new investment option to consider. Edelweiss Finance & Investments Limited, the NBFC arm of the Edelweiss group, is coming out with a public issue of Secured Redeemable Non-Convertible Debentures (NCD). The issue opens on January 23, 2020, and closes on January 31, 2020, with an option of early closure.
NCDs are fixed-income investments that carry a coupon rate of interest. Typically, they are issued by private institutions including NBFCs. The rate of interest offered on NCDs is generally higher than what one may get from banks or post office schemes.
This issue is rated CRISIL AA-/Stable by CRISIL and CARE has rated it as CARE AA Stable. These ratings indicate that the instruments are considered to have a high degree of safety for timely servicing of financial obligations and carry very low credit risk. However, as an investor one should be aware that the ratings may change over time. Hence, depending entirely on the ratings for investment purpose is not the right approach.
The minimum investment across all tenure is Rs 10,000. The coupon rate of interest per annum for NCD investors ranges from 9.7 per cent to 10.25 per cent. The NCDs are available for a tenure 18 months, 36 months, 60 months and 120 months, which comes with a monthly, annual and cumulative interest payout options.
All those investors in this issue who are also holders of NCDs previously issued by this or any group company or are equity shareholder of Edelweiss Financial Services will be eligible for an additional incentive of 0.20 per cent per annum. This means the returns can go to as high as 10.45 per cent for some investors. There is no Put and Call option for any tenure of NCD.
The highest annual rate of interest in this NCD issue is 10.25 per cent being offered on 5 and 10 years deposit. The highest monthly rate of interest in this NCD issue is 9.8 per cent being offered also on 5 and 10 years deposit. The effective yield on the 5-year cumulative option is 10.25 per cent.
Each NCD has a face value of Rs 1,000 each with the issue size amounting to Rs 125 crore, with an option to retain over-subscription up to Rs 125 crore aggregating to a total of Rs 250 crore of the issue. For providing liquidity, the NCDs are listed on BSE stock exchange.
The returns from NCD are taxable in the hands of the investor under the head “income from other sources”. Further, any gains from the sale of the NCDs in the stock exchange is treated as “Profits and gains from business” or as “Capital Gains”.
Although the NCDs are rated and secured in nature, the risk exists for the investor. High returns come with associated higher risk. Therefore, before investing, one should look at one’s own risk profile or consult one’s, financial advisor.