9.1% TATA Capital Finance NCD Sep 2018 – Should you invest?

 TATA Capital Finance NCD Sep 2018 - Should you invest-minTATA Capital Finance NCD Issue would open for subscription on 10th September, 2018. TATA Capital Finance NCD interest rates are up to 9.1%. They are offering both secured and unsecured NCD. When interest rates are low, high interest rate NCDs from TATA Capital Finance would definitely attract investors who want to invest for short term to medium term. Should you invest in TATA Capital Finance NCD Sep 2018? What are the risk factors one should consider before investing in such high risk NCDs?

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About TATA Capital Finance Limited


We are a Systemically Important Non – Deposit taking Non – Banking Financial Company (“ND – SI – NBFC”) focused on providing a broad suite of financing products customized to cater the needs of various segments. Our financing products include:

1) Corporate finance: The Corporate Finance Division (“CFD”) offers commercial finance which offers vaNilla term loans, working capital term loans, channel finance, bill discounting, construction equipment finance, leasing solutions, lease rental discounting, promoter finance and structured products. In addition, the Special Assets Management Group (“SAMG”) was formed to manage the project finance portfolio of the erstwhile infrastructure finance division;

2) Consumer finance: The Consumer Finance and Advisory Business Division (“CFABD”) offers a wide range of consumer loans such as car and two wheeler loans, commercial vehicle loans, tractor loans, business loans, loans against property, personal loans, consumer durable loans and loans against securities

Features of TATA Capital Finance NCD Sep 2018


Issue start date: 10-Sep-2018

Issue end date: 21-Sep-2018

NCD’s are available in 3 options. It offers NCD for 3 years, 5 years and 10 year tenure.

Coupon interest rates are between 8.8% to 9.1% for retail investors.

NCD Holders holding Series I, Series II, Series III, who fall under Category III or Category IV on the relevant Record Date, shall be eligible for an additional incentive of 0.10% p.a. for the interest payable for NCDs under Series I, Series II, Series III on the respective Interest Payment date

These are secured and unsecured NCDs.

Interest payable every year.

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/NSE. Hence, these are liquid investments.

NRI’s cannot apply to this NCD subscription.

The base issue size is Rs 2,000 Crores with an option to retain over-subscription up to Rs 7,500 Crores.

Edelweiss Financial Services, A.K. Capital Services and Axis Bank are Lead managers to the issue.

Tranche-I Prospectus can be downloaded at this link.

Interest rates of TATA Capital Finance NCD Tranche I Sep 2018


Here are the interest rates. Interest is paid every year.

1) 3 Years Secured NCD – Interest rate – 8.8% per annum

2) 5 Years Secured NCD – Interest rate – 8.9% per annum

3) 10 Years Un-Secured NCD – Interest rate – 9.1% per annum

How the NCD issue is allocated to various investors?


1) Retail Portion – 30% of the issue

2) HNI – 30% of the issue

3) Qualified Institutional Portion – 20% of the issue

4) Corporate Portion – 20% of the issue

What are the credit ratings for these NCDs?


The Secured NCDs have been rated by Crisil as CRISIL AAA/Stable.

The Secured NCDs have been rated by CARE as CARE AAA/Stable.

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When TATA Capital Finance NCD Sep 2018 is proposed to be listed on stock exchanges?


The NCDs are proposed to be listed on BSE and NSE. The NCDs shall be listed within 12 Working Days from the date of the Issue Closure.

How is the company doing in terms of profits?


Its consolidated profits are as below:

Year ended Mar-2017 – Rs 21,598 Lakhs

Year ended Mar-2018 – Rs 26,922 Lakhs

TATA Capital Finance NCD Sep 2018 – How the returns taxed?


For investors who are applying through demat account, there would not be TDS deduction.

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.

Why to invest?


The company is earning consistent and improving margins in the last few years. This indicates that this company has ability to consistently pay the interest rates for its creditors or NCD holders.

These NCDs offer attractive interest rates where you can get yield up to 9.1% per annum.

It issues 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 TATA Capital Finance Limited NCD Sep 2018?


TCFSL’s operations are susceptible to fluctuations in interest rates, which could cause our net interest income to vary and consequently affect our profitability.

Inability to sustain its growth or manage it effectively may affect its business, operations and profitability to a large extent.

They may not be able to successfully diversify its product portfolio, enter new lines of business or expand business in new regions and markets in India, which may materially and adversely affect its business prospects and impact its future financial performance

Any disruption in its sources of funding and inability to secure the requisite amount of financing at competitive rates for its growth plans could adversely affect its liquidity and financial condition

In respect of secured loans given by TCFSL, inability to recover, on a timely basis or at all, the full value of collateral or amounts which are sufficient to cover the outstanding amounts due under defaulted loans may adversely affect its business.

They operate in a highly competitive industry and its inability to compete effectively may adversely affect its business.

Its significant indebtedness and the conditions and restrictions imposed by its financing arrangements could restrict its ability to conduct its business and operations in the manner they desire

Some of the loans they provide are unsecured and are susceptible to certain operational and credit risks and substantial 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.

They are party to certain legal proceedings and any adverse outcome in these or other proceedings may adversely affect its business.

Other Internal and external factors can be read at the risk factors of the NCD prospectus.

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How to apply these TATA Capital Finance NCD Sep 2018?


TATA Capital Finance NCD Issue of September 2018 is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. For more information on this you can refer prospectus.

Conclusion: TATA Capital Finance Limited NCD’s of 2018 offers both secured and unsecured in nature. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. While banks are showing some signs of interest rates increase, the interest rates are still between 6% to 7.5% per annum, which are low compared to interest rates offered by these NCDs. Considering high interest rates and secured NCD’s in nature, one can consider investing in these NCD’s after assessing risk factors indicated above.  However, one should invest in them only for short to medium term. Don’t go for long term unsecured NCDs as we do not know how the company would perform in the long run.

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Suresh

TATA Capital Finance NCD Sep 2018 Review 

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