9.5% Mahindra Financial Services NCD Jan 2019 – Should you invest?

Mahindra Financial Services NCD Jan 2019 Review-minMahindra Financial Services NCD Jan 2019 Review


Mahindra & Mahindra Financial Services NCD for Jan 2019 (Mahindra Financial Services NCD) Tranche-I would open for subscription on 4th January, 2019. It is issuing secured + unsecured NCD’s this time. The yield is as high as 9.5% per annum. Mahindra and Mahindra Financial Services have a good credit rating from IND Ratings and CARE. Currently banks are offering low interest rates and investors are looking high interest rate NCD’s. Should you invest in Mahindra and Mahindra Financial Services NCD of Jan 2019? What are the hidden factors an investor should consider before investing Mahindra & Mahindra Financial Services NCD of 2019? In this article, I would provide some interesting insights about Mahindra and Mahindra Financial Services Ltd NCD.

Also Read: Top 10 Low risk and High Return Mutual Funds to invest in India

About Mahindra & Mahindra (M&M) Financial Services Limited


Mahindra & Mahindra Financial Services Limited is one of the leading non-banking finance companies (NBFC) with customers primarily in the rural and semi-urban markets of India. The Company is a part of the Mahindra group, which is one of the largest business groups in India. It is primarily engaged in providing financing for new and pre-owned auto and utility vehicles, tractors, cars and commercial vehicles. It also provides housing finance, personal loans, financing to small and medium enterprises, insurance broking and mutual fund distribution services. In addition the company, among other services, provide wholesale inventory financing to dealers and retail-financing to customers in the United States for the purchase of Mahindra group products through Mahindra & Mahindra Financial Services USA LLC, its joint venture with a subsidiary of the Rabobank group.

Mahindra & Mahindra Financial Services NCD Jan 2019


Mahindra Financial Services are issuing secured, un-secured sub-ordinated, redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 500 Crores with an option to retain another Rs 3,000 Crores over subscription totaling to Rs 3,500 Crores. It comes with 4 different options, which contains 39 months, 5 years, 8 years and 10 year tenure.

About Mahindra & Mahindra Financial Services Jan 2019 Unsecured NCD


They are offering secured and unsecured NCD’s now for Jan 2019. For un-secured NCD the assets are NOT backed up for principal and interest. In case something happens to company performance and company is closed, investors would be given normal preference in repayment of capital and interest.

Features of Mahindra & Mahindra Financial Services NCD of Jan 2019


Issue start date: 4-Jan-2019

Issue end date: 25-Jan-2019

NCD’s are available in 4 different options.

The interest of these NCDs is payable once in a year. It is not offering cumulative NCDs this time.

The face value of the NCD bond 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.

Non-resident Indians (NRI’s) cannot invest in these NCD’s.

CARE and IND Ratings rated as “AAA Stable”, which indicate that instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.

You can download Mahindra & Mahindra Financial Services NCD Tranche-I 2019 details here.

Here are the interest rates on the Jan 2019 NCD’s of Mahindra & Mahindra Financial Services.


Mahindra & Mahindra Financial Services NCD Jan 2019 - Interest rates-min

What is the issue break-up?


How is the company doing in terms of Financials?


Revenues of the company have increased from Rs 7,200 Crores in FY17 to Rs 8,573 Crores in FY18.

Profits after interest and taxes have increased from Rs 511 Crores (FY 2017) to Rs 1,023 Crores (FY2018).

Its Gross NPA was 7.4% for FY18 and it increased to 9% for 6 months ended Sep-2018.

Its Net NPA was 3.8% for FY18 and it increased to 6% for 6 months ended Sep-2018.

Why to invest?


This is a Leading NBFC company in India.

Attractive interest rates where one can get 9.5% yield.

Good credit rating of the company.

Also Read: Kosamattam Finance NCD Offers 10.75% yield – Should you subscribe?

Why not to invest in Mahindra & Mahindra Financial Services Jan 2019 NCD?


1) It issues Unsecured NCD’s. Means something happens to company performance and it gets windup, investors would be given less preference in repayment.

2) The risk of non-payment or default by borrowers may adversely affect its financial condition and results of operations.

3) Company’s provisioning requirements are insufficient to cover existing or future levels of nonperforming loans or if future regulation requires them to increase its provisions, its ability to raise additional capital and debt funds as well as its results of operations and financial condition could be adversely affected.

4) Company, its Subsidiaries and Promoter are involved in certain legal and other proceedings. Any adverse outcome in such proceedings may have an adverse effect on its business, results of operations and financial condition.

5) Priority sector lending requirements adhered to by scheduled commercial banks may increase its cost of funding and adversely affect company business, results of operations and financial condition.

6) Its vehicle financing business relies on the purchase of M&M vehicles, including tractors, any decline in the sale or quality of which could adversely affect its business and results of operations.

7) A significant portion of our collections from customers is in cash, exposing company to certain operational risks.

8) Any downgrade in its credit ratings could increase borrowing costs and adversely affect access to capital and lending markets and could also affect its interest margins, business, results of operations and financial condition.

9) You can refer all risk factors in the prospectus.

How to apply Mahindra and Mahindra Financial Service NCD 2019?


You can apply these NCDs in demat form only. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. You can reach out to any of the lead managers websites to know more details on how to apply them.

How Mahindra & Mahindra Financial Services Jan 2019 NCD are taxed?


Since you need to apply through the demat form only, there would not be any interest on the NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the interest in their income tax returns and pay income tax based on the individual tax bracket.

When this Mahindra & Mahindra Financial Services NCD of 2019 would get listed on BSE?


These Mahindra Finance NCDs of January, 2019 would get listed after 12 working days from the date of closure. Means it would get listed approx. on 13th February, 2019.

You may like: Best Bluechip Mutual Funds to invest in India

Should you invest in Mahindra & Mahindra Financial Services NCD of Jan 2019?


Refer my earlier articles about NCD’s and you would get the answer. You should ask these 4 questions before you want to invest in these NCDs.

1) Mahindra Financial Services offer both secured and unsecured NCDs. Investing in unsecured NCD’s would be high risk as they are not backed up with any assets of the company and in case of windup of the company due to performance issue, investors would get least preference in the repayment of these NCDs. Do you want to invest in such NCD’s then?

2) These NCD’s are for 39 months to 10 years. Do you want to park your money in high risk NCD for long term of 5 or 8 or 10 years? Parking money in high risk options for longer time is not advisable as no one can predict what happens to companies in the long term.

3) Mahindra & Mahindra Financial Services NCD offers 9.5% interest per annum. There are several banks which still offer 7.5% to 8% on their fixed deposits which carry little lower risk compared to NCDs. Should you invest in Mahindra Financial Services NCDs then?

4) Its NPAs are very high compared to other companies. In future there could be delays in payment of interest if they start writing off money and their profits shrink. Are you okay with this?

Conclusion: Mahindra Finance NCDs offer high interest rates. Secured NCDs are somewhat better compared to unsecured. If you are a high risk taker and willing to invest in such companies even after IL&FS  Scam, you can consider investing in Secured NCDs for 39 months or 5 years maximum. You should stay away from unsecured NCDs or NCDs that are for long term as we do not know how the company would perform in the long run.

Readers, do you feel these NCDs are worth investing?

If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.

Suresh

Mahindra & Mahindra Financial Services NCD Jan 2019 Review

The Author

Suresh KP

Suresh KP i.e. me have written 1,800+ articles on this blog. I have done by B.Com from Osmania University and then MBA-Finance from Symbiosis University, Pune. I have over 20 years of experience in analyzing various investment options and money saving ideas. I love doing financial planning, Mutual Fund Analysis, Searching long term Stocks for wealth creation, IPOs, reviewing Insurance Products, analysing Health insurance Plans etc.

10 Comments

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  1. I have not got an allotment in my account as yet. What should I do pls ?

  2. i applied through ASBA and i got Mahindra & Mahindra Financial Services NCD Jan 2019.
    now my query is can i sell this NCD in market time, ??
    i have 100 qty and i want to book profit.
    kindly suggest.

    1. You can sell them in open market provided there are buyers. You can place the request and see if that gets executed at the rate which wanted to sell

      1. Air you suggested me I can sell in open market but my query is there any penalty or hidden charges if I sell before maturity.?

        1. Hi Ankit, There is no penalty. However company would not buy your NCDs. These are purchased by any other buyers who is interested in the NCDs and can quote lower rate than Rs 1,000 bond rate.

          1. Thank you sir!!

  3. One important aspect that is missing is that one can apply ONLY through ASBA now. So your point of applying through IPO/NCD section of demat account is WRONG.

    Second have profits increased or decreased? You show an increase in numbers (almost 100%) but report REDUCED in your comments. You need to correct that.

    Third their Gross and Net NPAs do look on higher side. When you say these are “Very high” as compared to other NBFCs a quick comparision table will be very useful (atleast for 4-5 firms whose NCDs are currently in the market).
    Also since you write these commentaries frequently it can be used in future as well for reference post updating for latest numbers.

    1. Hello Mayank, here are my comments 1) ASBA is the facility. The process I indicated is to go to IPO/NCD section and when you apply your amount is blocked. Once company allots NCD your amount would get deducted from your account and NCD bonds would get credited. this process is ASBA. I indicated first step, you indicated second step. There is nothing wrong here 2) Comment corrected 3) The comparison with the company own NPA of last year vs 6 months ended is already given in financials section. Yes, comparison with peers would also gives good picture. Thanks for your valuable comments.

      1. thanks. Just to close the loop on 1st point, my point being brokers like Reliance who do not have a bank are NOT able to offer the same anymore through the route you have mentioned. Hence, for the same the same becomes obsolete. Hence, I suggested to include the ASBA aspect as well.

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