IFCI Secured NCD Bonds – Jan-2015 – Should you subscribe?
In Oct 2014, Government owned, IFCI Limited has issued Non Convertible Debenture (NCD) which offered 10% annualized yield. IFCI now again offering Secured NCD which offers 9.5% yield and it would open for subscription on 1st day of this new year in Jan-2015. We already gave our analysis earlier, we would touch upon some of the key highlights of the new IFCI Secured NCD of Jan-2015 Tranche II issue. How good is IFCI NCD of Jan 2015 Secured Bond? What are the positive factors of IFCI Secured NCD of Jan 2015? Can we invest / Subscribe to IFCI NCD’s of Tranche II of 2015?
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.
Features of IFCI NCD January-2015
- Start date: 1-Jan-2015
- End date: 4-Feb-2015
- NCD’s are available for 5 and 10 year tenure, which are secured in nature.
- It offers 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. 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 790.81 Crores Crores.
Below is the Interest rate chart.
How the company is doing in terms of Financials?
Below are the details 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
- Net Non Performing Assets (NPA) of the company stands at 9% for the period ended Sep, 2014.
Why to invest in IFCI NCD of Jan-2015
- 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. In case something happens to company due to non performance, secured NCD investors would get preference in repayment of interest and repayment of capital. 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 9.5% per annum. None of the Govt. owned company schemes are offering such high interest. Even banks now have reduced interest rates to below 8.75% per annum.
- ICRA rates as A (Stable) and Brick Work as AA- (Outlook Stable) which indicates medium safety.
Why not to invest in IFCI NCD of Jan 2015
- Company profits are in decline mode in the last couple of years compared to the last 5 years. There could be delays in payment of interest due to this.
- Net Non Performing Assets (NPA) stands at 9%, 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.
- Volatility in interest rates for lending and investment operations could affect company profits.
How to invest in these IFCI Limited Secured NCD's?
All major stock brokers offering demat account are offering 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 managers along the cheque.
Conclusion: IFCI offers good interest rates on these secured NCD’s. However, compared to other corporate NCD’s, it offers low interest rates. On top of this, if offers lower interest rates compared to its previous NCD. 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 for medium term to long term of 5 to 10 years. If you are in a lower tax bracket, this would be best bet which offers safe and high returns.
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IFCI Secured NCD Bonds – Jan-2015 – Should you subscribe