10% IFCI NCD (Secured) Bonds – Oct-2014
IFCI NCD (Secured) Bonds – Oct-2014
Government owned and promoted, IFCI Limited is coming up with Non Convertible Debenture (NCD) bonds now in Oct-2014. IFCI NCD’s would open for subscription on 20th October, 2014 which offers 10% interest rates. Since this is Govt owned and promoted organization and offering 10% interest rates, this is catching investor attention. How good is IFCI NCD of Oct 2014? What are the positive factors and risks involved, if you want to invest in IFCI NCD’s of Tranche I of 2014.
About IFCI Limited
IFCI Limited is owned by Govt of India, which has a 55 % stake. IFCI is systematically important non deposit taking NBFC Company in India. IFCI provides financial services which include, long term corporate loans, advisory services in the areas of Project Development, Project Appraisal, Strategic Analysis, Corporate Restructuring, Infrastructure Financing and Legal Advisory to certain sectors. The advisory services include bid process management, disinvestment advisory, techno-economic viability study, legal due diligence, financial advisory, valuation, financial appraisal, financial due diligence and project feasibility studies in core infrastructure sectors like power generation and transmission, oil & gas, mining, etc.
Features of IFCI NCD-Oct-2014
- Start date: 20-Oct-2014
- End date: 21-Nov-2014
- NCD’s are available for 5, 7 and 10 year tenure, which are secured in nature.
- It offers monthly, annual and cumulative options.
- Bond face value is Rs 1,000.
- Minimum investment is for 10 bonds means, you need to invest for a minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
- These NCD bonds would be listed on BSE and NSE. Hence, these are liquid investments (provided the buyer is available on that date when you sell such NCD’s).
- NCD’s can be invested through Demat account or Physical form.
- Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
- The issue size is Rs 250 Crores with an option to retain option shelf limit of Rs 2,000 Crores.
Below is the Interest rate chart.
How the company is doing in terms of Financials?
1) Below are the details of profit after tax (rounded to nearest Crore)
- Year ended Mar-2010 – Rs 693 Crores
- Year ended Mar-2011 – Rs 745 Crores
- Year ended Mar-2012 – Rs 687 Crores
- Year ended Mar-2013 – Rs 497 Crores
- Year ended Mar-2014 – Rs 566 Crores
2) Net Non Performing Assets (NPA) of the company are at 10% for the period ended June, 2014.
Why to invest in IFCI NCD of Oct-2014
- Company earning good revenues in last 5 years. This creates confidence in the company. Its revenues increased from Rs 1,757 Crores in FY 2010 to Rs 3,639 Crores in FY2014.
- It offers secure NCD’s. Means in case company would wind-up due to financial issues / non performance, investors of NCD would get preference in re-payment of the principal. However, there could be delays. Hence it is relatively safe to invest in such secured NCD’s. Secured NCD’s in Govt. owned company is best and safe investment option.
- Attractive interest rates of 10% per annum. None of the Govt. owned company schemes are offering such high interest.
- ICRA rates as A (Stable) and Brick Work as AA- (Outlook Stable) which indicates medium safety.
Why not to invest in IFCI NCD of Oct 2014?
- Company profits are in decline mode in the last 2 years compared to the last 5 years. There could be delays in payment of interest due to this.
- Net Non Performing Assets (NPA) are at 10%, which is very high.
- The company is subjected to supervision and regulation by the RBI as an NBFC and changes in RBI’s regulations governing could adversely affect their business.
- The company is affected by volatility in interest rates for lending and investment operations as well as the rates at which the company borrows funds, which could adversely affect return on assets and profitability.
How to invest?
All major stock brokers offering demat account do offer NCD’s through your normal demat account. You can login to your demat account and apply. In case you want to apply in physical form, the process is indicated in the prospectus. You need to send application form to its lead manager, Edelweiss Financial Services Limited by preparing cheque in favor of “Escrow Account IFCI NCD | Public Issue”.
You can download the prospectus of IFCI Limited NCD of October, 2014.
You can download the applicatiun form of IFCI NCD of October, 2014 at this link.
Conclusion: IFCI offers good interest rates on these NCD’s. However, compared to other corporate NCD’s, it offers low interest rates. Medium to low risk investors who do not want to take risks, but looking for higher interest rates compared to bank FD’s can park money. Irrespective of tax bracket, this would be best bet which offers safe and high post tax returns compared to the investment options available to us.
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IFCI NCD (Secured) Bonds-Oct-2014