9.75% JM Financial Credit Solutions NCD Issue May 2018 – Should you invest?
JM Financial Credit Solutions NCD Issue May 2018 – Should you invest?
After Dewan Housing Finance NCDs, now JM Financial Credit Solutions Limited (JMFCSL) is coming with NCDs now. JM Financial Credit Solutions NCD May 2018 Public Issue would open for subscription on 28th May, 2018. JM Financial Credit Solutions NCD offers up to 9.75% interest rates. These are Secured NCDs. When interest rates are low, high interest rate NCDs from Dewan Housing Finance Corporation (DHFL) or JM Financial Credit Solutions Ltd would definitely attract investors who want to invest in the short term to medium term. Should you invest in JM Financial Credit Solutions NCD Issue May/June 2018 of Tranche I? What are the risk factors one should consider before investing in such NCDs?
About JM Financial Credit Solutions Limited (JMFCSL)
JM Financial Credit Solutions Limited (JMFCSL) is a non-deposit accepting systemically important non-banking finance company (NBFC) registered with the Reserve Bank of India (RBI). The company was jointly promoted by the JM Financial Group, a leading diversified financial services provider in the country, and INH Mauritius 1 Fund, a global fund led by Mr. Vikram Pandit, ex-CEO of Citigroup.
Features of JM Financial Credit Solutions NCD Issue May 2018 – Tranche I
Issue start date: 28-May-2018
Issue end date: 20-Jun-2018
NCD’s are available in 6 options. It offers NCD for 38 months, 60 months and 120 months.
These are secured NCDs.
Interest payable monthly/yearly/on maturity depending on the option chosen by the investor.
The 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. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
These NCD’s are rated as AA/Stable by IND Rating and ICRA. The rating of the NCDs by ICRA and India Ratings indicates a high degree of safety regarding timely servicing of financial obligations
The trustee would be IDBI Trustee Services Limited.
Interest rates of JM Financial Credit Solutions NCD Issue May 2018 – Tranche I
When JM Financial Credit Solutions NCD May 2018 is proposed to be listed on stock exchanges?
The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 12 Working Days from the date of the Tranche 1 Issue Closure. Its closure date is 20-Jun-18 or earlier (depending on the response from the public).
How is the company doing in terms of Revenues and Profits?
Its Revenues are at Rs 2,267 Crores for FY2017 Vs Rs 3,131 Crores for FY2018.
Its Profits are at Rs 470 Crores for FY2017 Vs Rs 631 Crores for FY2018.
What is the size of JM Financial Credit Solutions NCD Issue May 2018?
The initial size of the Tranche I – NCD issue is Rs 300 Crores with an option to retain upto Rs 450 Crores totaling to Rs 750 Crores.
What are the objects of this NCD Offer?
Here are the objects of the NCD Public Issue.
1) For the purpose of onward lending, financing, and for repayment /prepayment of interest and principal of existing borrowings of the Company.
2) For General Corporate purpose.
Who can apply for these NCDs?
The following categories of persons are eligible to apply in the Tranche I Issue.
Category I – Institutional Investors
Category II – Non Institutional Investors
Category III – High Net Worth Individuals (HNI)
Category IV – Retail Investors
What is the basis of allotment / allocation ratio JM Financial Credit Solutions NCD Issue May 2018?
Institutional Portion – 20%
Non Institutional Investors Portion – 20%
High Net Worth Individuals (HNI) – 30%
Retail Investors – 30%
What is the record date for payment of interest / repayment of principal on these NCDs?
The Record Date for the payment of interest in connection with the Secured NCDs or repayment of principal in connection therewith shall be 15 days prior to the date on which interest is due and payable, and/or the date of redemption. Provided that trading in the Secured NCDs shall remain suspended between the aforementioned Record Date in connection with redemption of Secured NCDs and the date of redemption or as prescribed by the Stock Exchange, as the case may be. In case Record Date falls on a day when Stock Exchange is having a trading holiday, the immediate subsequent trading day or a date notified by the Company to the Stock Exchanges, will be deemed as the Record Date.
What are the taxation rules for these NCDs?
These NCDs would provide fixed income per month or per annum or on maturity. Since these are issued in demat form, the company would not deduct any income tax on the interest on these NCDs. However, it is the duty of the individual to declare this income and pay income tax as per their income tax slab. E.g. if you are falling under 20% tax bracket and received Rs 10,000 as income, you need to pay Rs 2,000 as income tax in that year.
Why to invest?
The company is earning consistent revenues and margins in the last few years.
These NCDs offer attractive interest rates where you can get yield up to 9.75% per annum.
These are secured NCDs. In case of any non performance of the company and the 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.
Why not to invest in JM Financial Credit Solutions NCD Issue May 2018?
Company Promoter is involved in certain tax proceedings, that if determined against the Promoter, could have a material adverse effect on company business, financial condition and results of operations.
Any volatility in interest rates could adversely affect company net interest margins, financial performance and results of operations.
If the company is unable to continue to benefit from company relationship with company Promoter and the “JM Financial” brand, company business and results of operations may be adversely affected.
They operate in an increasingly competitive financial services industry, which creates significant pricing pressures and may adversely affect company net interest margins, income and market share.
Further, company growth depends on a company's ability to compete effectively in this competitive environment.
The company is a non-deposit taking systematically important non-banking finance company, i.e. NBFC-NDSI and therefore the company is subject to supervision and regulation by the RBI, as an NBFC-ND-SI, and other regulatory authorities.
They operate in highly regulated business and are subject to various laws and regulations and regulatory investigations. Changes in the RBI's regulations and other regulations, and the regulation governing company Company or the industry in which company operates may have a material adverse effect on company business, financial condition or results of operation.
The company's ability to borrow from various banks may be restricted on account of guidelines issued by the RBI imposing restrictions on banks in relation to their exposure to NBFCs which could have an impact on company business and could affect company growth, margins and business operations company loan portfolio is significantly exposed to real estate which may lead to an increase in its impairment losses and adversely affect the company financial condition and results of operations.
Any downgrade in credit ratings could increase interest rates for refinancing outstanding debt, which would increase financing costs, and adversely affect future issuances of debt and the ability to borrow on a competitive basis, which could adversely affect company business, financial condition, results of operations and cash flows.
Increase in NPA levels due to customer defaults could impact the quality of company portfolio and their business may be adversely affected if the company is unable to provide for such higher levels of NPAs.
Other Internal and external factors can be read at the risk factors of the NCD prospectus.
How to apply these JM Financial Credit Solutions NCD Issue May 2018 – Tranche I?
JM Financial Credit Solutions NCD Issue of May/June Tranche-I of 2018 is available only in demat form. You can apply online at any of the broker website where you are maintaining a demat account. For more information on this you can visit JMFinancial or Edelweiss website.
Conclusion: These JM Financial Credit Solutions Limited NCD’s 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, one can consider investing in these NCD’s after assessing risk factors indicated above.
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JM Financial Credit Solutions NCD Issue May 2018 – Tranche I