Edelweiss Retail Finance NCD would open for subscription on 7th March, 2018. Edelweiss Retail Finance Limited is a Leading Non Banking Finance Company (NBFC) in India. Edelweiss Retail Finance NCD March 2018 offers upto 9.25% interest rates, which are good interest rates compared to bank FDs now. What are the features of Edelweiss Retail Finance NCD March 2018? What are the risk factors an investor should consider before investing in NCDs of Edelweiss Retail Finance? In this article, I would provide some interest facts about these NCDs and do Edelweiss Retail Finance March 2018 NCD review.
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About Edelweiss Retail Finance Limited
Edelweiss Retail Finance Limited (ERFL) incorporated on Feb 18, 1997, is a RBI registered NBFC ND-SI. ERFL is a NBFC belonging to Edelweiss Group – one of India’s prominent financial services organizations having businesses organized around three broad lines – credit including retail finance; franchise & advisory businesses including wealth management, asset management, capital markets, balance sheet management and others, and insurance business. Edelweiss Group has a pan India presence with a global footprint extending across geographies with offices in New York, Mauritius, Dubai, Singapore, Hong Kong and UK. It is listed on BSE and National Stock Exchange of India Limited. Products include SME Finance, Loans against property, Construction Finance & Rural Finance.
Features of Edelweiss Retail Finance NCD March 2018
Issue start date: 7-March-2018
Issue end date: 22-March-2018
It offers Secured Non Convertible Debentures (NCDs).
NCD’s are available in 6 options which includes 3 years, 5 years and 10 years tenure.
Interest payable monthly and yearly depending on the option of NCD.
Face value of the NCD bond is Rs 1000.
Minimum investment is for the 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/NSE. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
These NCD’s are rated as CRISIL AA/Stable and ICRA AA/Outlook Stable.
The base issue size is Rs 250 Crores with an option to retain over-subscription upto is Rs 500 Crores.
These bonds are available on first come first serve basis. Means the NCD issue can get closed before closure date if it is oversubscribed.
NCD Prospectus can be downloaded this link
How the NCD issue is allocated to various investors?
1) Retail Portion – 50% of the issue
2) Institutional Portion – 20% of the issue
3) Non Institutional Portion – 10% of the issue
4) HNI – 20% of the issue
Interest rates of Edelweiss Retail Finance NCD March 2018
What are the effective yield from Edelweiss Retail Finance NCD of 2018?
1) The Secured NCDs have been rated by Crisil as AA/Stable.
2) The Secured NCDs have been rated by ICRA as AA/Outlook Stable.
Edelweiss Retail Finance NCD March 2018 Issue – How the returns taxed?
1) For investors who are applying through demat account, there would not be TDS deduction.
2) Income tax on interest would be based on individual tax slab. Means, irrespective of whether company deducts TDS or not, you should show the interest income on your income tax return and pay necessary income tax.
How is the company doing in terms of profits?
Its profits are as below:
1) Year ended Mar-2013 – Loss of Rs 4.58 Millions
2) Year ended Mar-2014 – Profit of Rs 0.98 Millions
3) Year ended Mar-2015 – Profit of Rs 76.56 Millions
4) Year ended Mar-2016 – Profit of Rs 247 Millions
5) Year ended Mar-2017 – Profit of Rs 319 Millions
Why to invest in Edelweiss Retail Finance NCD 2018?
1) The company is earning good profits in the last few years. Profits have been increasing year on year, which indicates strong repayment capacity of interest from its profits.
2) Good revenue growth story in last 3 years. This indicates company strong capabilities.
3) Attractive interest rates of 9.25% per annum.
4) This is secured NCD issue. In case of any non performance of the company and company gets closed for some reason, NCD investors would get preference in repayment of capital along with interest. Hence it is safe to invest in such secured NCD options. However, it is only preference is given to NCD investors and no guarantee that entire amount would be paid-back in such cases.
5) No TDS if you invest in demat form.
Why not to invest in Edelweiss Retail Finance NCD March 2018?
1) Any increase in the levels of non-performing assets in its loan portfolio, for any reason whatsoever, would adversely affect its business, results of operations and financial condition.
2) They are a non-deposit taking systematically important non-banking finance company i.e. NBFC-ND-SI and therefore they are subject to supervision and regulation by the RBI, as an NBFC-ND-SI, and other regulatory authorities. Changes in the RBI's regulations and other regulations, and the regulation governing its Company or the industry in which its Company operates could adversely affect its business. Also, future regulatory changes may have a material adverse effect on its business, results of operations and financial condition.
3) As at December 31, 2017, SME finance loan book amounted to Rs 16,627.83 million constituted 58.70% of its Company’s Loan Book. The SMEs to which its Company provides loans may not perform as expected and this may adversely affect its Company’s performance.
4) Business is vulnerable to interest rate volatility and we will be impacted by any volatility in such interest rates in its lending and treasury operations, which could cause its net interest income and margins to decline and adversely affect its return on assets and profitability.
5) As an NBFC, the risk of default and late or non-payment by borrowers and other counterparties may materially and adversely affect its asset quality and profitability. Any such defaults, late payment or non-payments would result in provisions or write offs in its financial statements which may materially and adversely affect its asset quality, cash flows, and profitability.
6) They may be subject to periodic inspections by the RBI. Non-compliance with the RBI observations made during any such inspections could adversely affect its reputation, business, financial condition, results of operations and cash flows.
7) Other Internal and external factors can be read in the RHP NCD prospectus.
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How to apply these Edelweiss Retail Finance Ltd NCD of March 2018?
Majority of the stock brokers who maintains demat accounts are offering the service of FD’s subscription too. You can directly apply by login to demat account portal. Alternatively you can download the paper application here and apply for the same.
Conclusion: These Edelweiss Retail Retail Finance NCD’s of March 2018 are secured in nature. Though it carries some element of risk, they are secured. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. Considering high interest rates and secured NCD’s in nature, once can consider investing in these NCD’s after assessing risk factors indicated above.
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Suresh
Edelweiss Retail Finance NCD March 2018 – Should you invest
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Very nicely explained sirji , but how can you surely say that secured NCDs are risk free ? My own money is in D.S.KULKARNI SECURED NCDS. There is no interest payment nor maturity redemption. I wrote to SEBI but no reply yet. The directors are behind bars & i now dont know when & how i shall get my money back. The credit rating at the time of issue in 2014 was AA & in june 2017 it defaulted in interest payment & in september 2017 it defaulted in maturity
Hi Dhaval, I already indicated that there is element of risk in payment of interest and repayment of capital. In your case, since you invested in secured NCDs, you would your money back, however the question is when? This is what I call it as risk in unsecured NCDs.
is their 0.25 extra like in srei for senior citizen ?
Excellent explanation, please do clarify my following doubt j
i am retired, would like to have regular monthly income
is it good to invest into this 9.25% Edelweiss Retail Finance NCD March 2018 – for the monthly income for 10 years
OR
is it good to invest into SWP , if so which one please do help me wrt the same thanks
Hi Raman, These are for high risk investors. Since you are retired, you can invest for short term of say 3 years only. Beyond this it would be high risk for retired individuals. Alternatively you can invest in SWP in mutual funds which is always a best investment option
Thank you for the heads up. It would be useful to mention that if locks in an investment at the rate of 9.25% for 10 years now, there is a good chance that there would be an increase in rate in the next few years and that exceed 9.25%. Perhaps readers will consider the three or five-year option.
Thanks again for posting your review.
Rohit, Interest rates are locked for the period of NCD.
So do you recommend to invest in this NCD too for max 3 years as you suggested for SREI Infra NCD? Out of the two, which is less riskier? Thank you.
Hi Rajagopal, The highest to lowest credit rating is as follows: AAA > AA+ > AA > AA- > A+ > A > A-. Means, SRE NCD rating of AA+ is good compared to ERFL NCD rating of AA. Investing in low tenure NCDs would always be better. One can invest 3 or 5 years tenure in ERFL. Same case with SREI NCD