IIFL NCD Secured Bonds-Sep-2013-Yield up to 12.68%-Should we invest?

IIFL NCD Secured Bond-Sep-2013IIFL NCD Secured Bonds-Sep-2013-Yield up to 12.68%-Should we invest?

Stock markets are going up. Secured NCD's and tax freebonds are in the market now. Investors have several choices to invest. To add this, India Infoline Finance Ltd is coming up with Non-Convertible Debenture (NCD) Secured Bonds. The interest rates are as high as 12.68% per annum and it is available in 3 years and 5 years tenure. Can we invest in IIFL NCD Secured Bonds? What are its features and the risks involved in IIFL Bonds?

About IIFL

India Infoline Finance Ltd is subsidiary of India Infoline Ltd which is largest diversified financing company. IIFL is NBFC Company focusing on mortgage loans, commercial vehicle finance, gold loans, capital market finance and health care finance.

Also read: Ways to make money online by writing articles?

Features of IIFL NCD Secured Bonds

  • Issue start date: 17-Sep-2013
  • Issue end date: 4-Oct-2013
  • Secured Bonds are available in 4 different options. Option 1 and 2 are for 36 months tenure (Monthly and Annual interest payment options). Option 3 and 4 are 60 months tenure where interest is paid monthly and annually. This is not that complicated like Muthoot Finance where they issued 10 different options and confused the investors.
  • Interest is payable monthly or annually.
  • Face value of the NCD secured bond is Rs 1,000.
  • Minimum investment is for 5 bonds means, you need to invest for minimum of Rs 5,000. Beyond this you can invest in multiples of 1 bond.
  • These NCD bonds would be listed in stock exchanges. Hence these are liquid investments.
  • Non-Resident Indians (NRI’s) can invest in these NCD’s.
  • The issue size is Rs 525 Crores with an option to retain oversubscription to Rs 525 Crores aggregating to Rs 1,050 Crores.
  • Draft Prospectus: http://www.iiflfinance.com/Portals/0/IIISL_Solution/pdf/IndiaInfolineFinanceLtd-Prospectus_2013.pdf

Below are the Interest rates details.

IIFL NCD Secured Bond-Sep-2013-Interest Chart

IIFL NCD Secured Bond-Sep-2013-Interest Chart-post tax returns

How company is doing in terms of financials?

  • Revenues of the company has grown from Rs 9,109.7 Mn (FY 2011-12) to Rs 16,939.82 Mn (FY 2012-13) indicating a growth of 85%.
  • Profits increased from Rs 892.02 Mn (FY 2011-12) to Rs 1004.39 Mn (FY 2012-13) indicating a profit growth of 72%.
  • Non Performing Assets (NPA) of the company is 0.56% (FY2011-12) Vs 0.49% (FY 2012-13).

Why to invest?

  • Attractive interest rate of 12% per annum and yield on monthly interest would work out to be 12.68% per annum.
  • The NCDs proposed under this Issue have been rated ‘CARE AA’[Double A] by CARE and ‘BWR AA (Outlook:Stable)' by Brickwork. The rating indicates instruments are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
  • Company is doing well in terms of revenues and profits.
  • It offers secured NCD’s where your money is safe. Means in case of any unforeseen thing happening to company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
  • Low NPA indicates low risk on debts.

Why not to invest?

  • As of June 30, 2013 and March 31, 2013 IIFL capital adequacy ratio computed on the basis of applicable RBI requirement was 21.10 % and 21.60% as compared to a minimum of capital adequacy requirement of 15% stipulated by RBI for FY13.
  • Due to change in interest rates charged to customers (not to investors) the profits may decline.

How to apply?

You can apply directly from your stock broker where you are maintaining demat account. You can also apply directly by preparing a cheque with necessary documents and send it to IIFL office directly. You can refer to page no. 282 of prospectus on the process of applying manually.

SREI NCD Vs Muthoot Finance NCD’s Vs IIFL NCD Secure bonds

Currently SREI secured NCD and Muthoot Finance NCD’s are also running. All of them would be allotted on first-come-first serve basis. Here is a quick comparison.

Interest rates: SREI secured NCD offers 11.50% interest whereas Muthoot is offering 12.55% interest rates. IIFL offers 12% interest rate. If you opt for monthly payment of interest you would get 12.68% per annum.

Security: SREI NCD is secured. Muthoot Finance NCD is offering Secured NCD and un-secured NCD. Unsecured NCD’s does not provide any security and investors should be little cautious about this. IIFL offers secured NCD Bonds.

TDS: All these companies are not deducting TDS if you apply in demat form.

Also read: How much gold should be part of your portfolio?

REC Tax free bonds Vs IIFL NCD Secured bonds

Let us go one more step ahead and check current REC tax free bonds comparison with NCD Secured bonds. Both are secured. However post tax the returns would be lower for IIFL NCD Secure Bond. If you are in highest tax bracket of 30%, it is wise to invest in REC tax free bonds where the yield would be 8.7% whereas IIFL Secured Bond yield would be 8.4% only (post tax).

Conclusion: Under stock market volatility where investors are thinking where to invest, secured NCD issue would definitely benefit investors. Investors can subscribe to IIFL NCD secured bonds which offers highest safety and high interest rates. High tax bracket individuals can opt for REC bonds rather than IIFL Secured bonds.

What is your opinion in NCD Bonds? Have you invested in any bonds earlier? What is your experience?

If you enjoyed this article, share this with your friends and colleagues through Facebook and twitter.

Suresh
IIFL NCD Secured Bonds-Sep-2013-Yield up to 12.68%

Article by Suresh

Suresh KP i.e. me have written 500+ articles on this blog. I love doing analysis and identifying the Best investment options.

27 Comments

  1. D.V.Sobti says:

    As per prospectus of IIFL, they want to invest in bank deposits and repay the loans.How they can pay the investor from earnings of bank deposits as their interest is low.

    • Suresh says:

      Hi DV Sobti, There is no indication anywhere that they would invest this amount in Bank Deposits. The prospectus clearly specify that such procees would be used for lending money and investing in growth or repayment of existing loans. Pls quote reference or page no so that I can check.

  2. gilson dcruz says:

    I found the informaton precise and am happy to visit your webpages in future.  

     

    Thanks

    gd

  3. kumar says:

    Hi,

    I am new to this type of invesment. I am planning to invest rs 30000. I just want to know wheather should I invest the whole amount to buy a single IIFL bond or can I split the money to buy more bonds. Also, please tell me how the intrest would be calculated.

    Thanks!

    • Suresh says:

      Hi Kumar, suggest you invest in 2 options like IIFL and any other bonds which you feel it would fit. If you are high tax bracket, invest in HUDCO tax free bonds which are open today

  4. Pankaj says:

    Hey Can i invesment in iifl bonds without demat account. and get submit a 15g form?

    is it possible or not.

     

    Pankaj

    • Suresh says:

      Pankaj, Form15G/15H can only be submitted in banks. For IIFL bonds, if you do not take thru demat account, TDS would be deducted beyond Rs 5,000 interest.

  5. Akshay says:

    I wanted to know whether to invest if i dont have a demat account.Can we just apply by filling physical form ? I want to apply for Rs 30000 and this will not fall in any tax bracket as it will be in my mother's name.

  6. P.Suresh says:

    Hi Suresh,Thanks for the detailed explanation

  7. Zubin Baisiwala says:

    Hi Suresh

    Firstly, thank you so much for keeping us up to date on latest investment options. I am regular reader of all your articles and I must say you are doing stupendous job!

    I am confused whether i should invest in IIFL NCD or KTDFC FD or Recurring deposit at Karnataka Bank @ 9.25%.

    I can either invest 5,000 per month in Karnataka Bank recurring deposit @ 9.25% or invest 10,000 each in IIFL NCD and KTDFC FD (or 20,000 lumpsum in NCD or FD). If I opt for recurring deposit I can increase my corpus at the end of the year to 60,000 along with 9.25% interest which would not be chargeable to TDS.

    Plan B could be that I invest 10,000 each in IIFL NCD and KTDFC (or 20,000 in one of them). Post which next month I start recurring deposit with Karnataka Bank for 5,000 pm. I guess that would diversify my investments to reduce the risk?

    Please suggest what plan I should look at? My tax bracket is 20%. I also invest 10,000 each month in SIP.

    Thanks in advance

    Zubin Baisiwala  

    • Suresh says:

      Hi Zubin, It depends. e.g. KTDFC is govt company, good interest rates, but you may not liquidate in case of emergency as they can be done subject to conditions. IIFCL bonds would be traded in stock exchanges, but you may get less amount in case you want to liquidate before maturity as it would be traded on stock market and fluctuations can happen. These two optiosn can be chosen in case you lock your money and do not expect for liquidity. On the other hand, Kar bank, you get low interest, but you can liqudiate, by giving 1-2 days notice without any penalty. Based on these factors, you should choose. Your tax bracket may not play a role here as all of them are taxable. 

      • Zubin Baisiwala says:

        hey thank you for prompt reply.

        I guess IIFL is more sensible. But if compared with REC which one would you think would be better?

        Also, does it make sense to park INR 20,000 in such funds for 10-15 years for about 11-12% interest? By that i mean if amount is less then is it better to park your funds in tax free bonds/NCD or is it better to invest in recurring deposit and grow corpus and think about above funds when one has surplus of 1 lac+ to invest? 

        • Suresh says:

          I have already given comparison between IIFL and REC bonds. Though both are not comparable, I know someone like you would definitely ask such question :-) No problem. Since you are in 20% tax bracket, it would make sense to invest in IIFL for 3 to 5 years as post tax returns would be high in this. Both are secured, but REC, you need to hold for 10,15 or 20 years. You can sell on stock exchange, but they may trade at low price due to non availability of purchasers. If I am in your place, I would prefer to invest in IIFL Secured bonds for the amount I am comfortable in investing where I do not need for 3 to 5 years. Whateever I expect that I may require in short term, I invest in Karnataka bank in RD form. This way I would achieve both objectives.

          • Zubin Baisiwala says:

            hahahaha exactly the reason why I was asking you this question because it was clear that if I am coming in 30% bracket then REC is simple option. But with so many options to choose from and obviously very little amount available for me to invest I thought to seek advise from you to diversify my portfolio in NCD and recurring deposits :) 

            I think i would invest Rs. 20,000 in IIFL and would start Rs. 5,000 pm recurring deposit with Karnataka.

            Thank you once again :)

          • Zubin Baisiwala says:

            One last question. I may sound dumb. Is it better to go for monthly interest or yearly interest?

          • Suresh says:

            If you have any monthly commitment, you can go for monthly,else you can go yearly. Amounts received every month would go somewhere and we may not see real good amount

          • Zubin Baisiwala says:

            sorry one more interesting question. you mentioned that these IIFL NCD would be traded on stock market so price would fluctuate and we have an option to liquidate at any point of time at current price. If I am correct, does that mean that if would want to buy more such bonds once the issue closes then I can purchase the same on stock exchange at current rate applicable on that day like we purchase any other stock?

          • Suresh says:

            Yes Zubin, you can buy. However e.g. the issue price is Rs 1,000, so the bond can trade anything higher or lower. Some of the bonds are trading at Rs 950 also. If some one needs money, he would liquidate at this rate and incurr 5% loss. However if you can keep your money till maturity, you would get back your Rs 1,000 face value of the bond.

    • Zubin Baisiwala says:

      Thank you so much Suresh for advising me yet again. it is always a pleasure chatting with you and seeking more insight. by the way I just got Recurring Deposit for 5000 from Karnataka Bank this day. The best part I liked about Karnataka Bank is that although they are giving 9.25% interest on 1 year deposit, they are also not charging any penalty on premature closure of recurring deposit. :)

      My next goal now is to get IIFL NCD for 20,000 :)

      Thank you once again Suresh.

      • Suresh says:

        Good Zubin. Planning of investments is not one time activity. We should keep investing new investment options and various investment optoins when we would know which one is working better for us.

  8. libu says:

    Are you sure NRIs can invest ?

    • Suresh says:

      Hi Libu, 200% sure that NRI’s can invest in IIFL NCD Secure bonds of Sep-2013. Please refer XXIV page number of the prospectus at http://www.iiflfinance.com/Portals/0/IIISL_Solution/pdf/IndiaInfolineFinanceLtd-Prospectus_2013.pdf

  9. sreeram says:

    Hi Suresh,

       In IIFL NCD they mentioned that no TDS applicable if taken in demat format so should we have to consider POST TAX returns if taken in Demat.

    Thanks & Regards

    Sreeram

Leave a Reply

Your email address will not be published. Required fields are marked *