10.4% JM Financial Products NCD August 2019 – Should you Avoid?
JM Financial Products NCD August 2019 Review
JM Financial Products NCD for August 2019 – Tranche II would open for subscription on 6th August, 2019. JM Financial Products is Systemically Important Non – Deposit Taking Company (NBFC) in India. It is issuing secured NCD’s. The yield is as high as 10.4% per annum and attracting investors now. It is offering NCDs of 38 months, 60 months and 84 months. Should you invest in JM Financial Products NCD of August 2019 – Tranche-II? What are the risk factors an investor should consider before investing JM Financial Products NCD of 2019?
About JM Financial Products Limited
The company is a Systemically Important Non – Deposit Taking NBFC registered with the Reserve Bank of India. They are focused on offering a broad suite of secured and unsecured loan products which are customized to suit the needs of the corporates, SMEs and individuals. The company proudly operates under fits verticals viz. (i) Fixed income division (structured finance); (ii) fixed income division (real estate financing) (iii) capital market financing and (iv) SME financing.
JM Financial Products NCD August 2019 Issue details
JM Financial Products Limited is issuing secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 100 Crores with an option to retain another Rs 400 Crores over subscription totaling to Rs 500 Crores. It comes with 5 different options, which has 38 months, 60 months and 84 months tenure NCDs.
What does Secured NCDs mean?
They are offering secured NCD’s now in August 2019. The principal amount of the NCDs to be issued in terms of the Draft Shelf Prospectus, this Shelf Prospectus and respective Tranche Prospectus together with all interest due on the NCDs in respect thereof shall be secured by way of an exclusive charge on identified receivables of Company and a pari passu charge in favour of the Debenture Trustee on an identified immovable property of Company, as may be decided mutually by Company and/or the Debenture Trustee at the time of filing of relevant Tranche Prospectus. Company will create appropriate security in favour of the Debenture Trustee for the NCD Holders on the assets adequate to ensure 100% asset cover for the NCDs.
What are NCD Bonds?
If you want to more about NCD bonds, you can view this video.
JM Financial Products NCD of August 2019 Tranche II issue details
Issue start date: 6-August-2019
Issue end date: 4-September-2019
NCD’s are available in 5 different options.
The interest options in these NCDs is to pay interest either monthly, annually and at maturity based on the option chosen.
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.
CRISIL rated these NCDs as AA/stable and ICRA as AA. The rating of the NCDs indicates that instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations.
AK Capital Services, JM Financials and Trust Investment Advisors are the lead managers for this issue.
You can download the Tranche-1 Prospectus of JM Financial Products NCD 2019 here.
Here are the interest rates on the August 2019 NCD’s of JM Financial Products.
What is the Eligibility to receive additional incentive?
The initial Allottees being Resident Indian Individuals forming part of Category III (High Net-worth Individual Investors other than Hindu Undivided Families) and Category IV (Retail Individual Investors other than Hindu Undivided Families) in the Tranche II, Issue who are Senior Citizens (above 60 years of age) on the Deemed Date of Allotment shall be eligible for an additional incentive of 0.10% p.a. provided that, the NCDs issued under the proposed Tranche II, Issue are continuing to be held by such investors on the relevant Record Date for the relevant Coupon / Interest Payment Date for the relevant Series.
What is the issue break-up?
Institutional Portion – 10%
Non Institutional Portion – 10%
High Net Worth Individuals – 40%
Retail Investors – 40%
How is the company doing in terms of Financials?
Here are the financials:
1) Its standalone revenues increased from Rs 891.95 Crores in FY2018 to Rs 949.03 Crores in FY2019.
2) Its standalone profits increased from Rs 109.04 Crores in FY2018 to Rs 111.46 Crores in FY2019.
Why to invest in JM Financial Products Ltd NCD?
1) Attractive interest rates where one can get up to 10.4% yield.
2) It is issuing secured NCDs which are safe to invest compared to other unsecured NCDs.
3) Good credit rating from CRISIL and ICRA Ratings as AA and AA/Stable respectively.
What are the objects of issuing these NCDs?
These objectives would help investors to know where the company would spend your money.
1) For the purpose of onward lending, financing, and for repayment /prepayment of interest and/or principal of borrowings of the Company
2) General Corporate purpose
Why not to invest in JM Financial Products August 2019 NCD of Tranche-II?
1) They are required to comply with various financial and other covenants under the loan agreements that they are a party to. If they are not in compliance with the covenants contained in such loan agreements, its lenders could accelerate their respective repayment schedules, and enforce their respective security interests, which would lead to an adverse effect on its business, results of operations and financial condition.
2) Company, Subsidiary, Promoter and Group Companies are involved in certain legal and other proceedings (including criminal proceedings) that if determined against us, could have a material adverse effect on its business, financial condition and results of operations.
3) They are dependent on its fellow subsidiary company, JM Financial Credit Solutions Limited for the origination of loans in the real estate segment. Any inability to originate loans for them will adversely impact the business operations of the Company.
4) Significant operational and financial integration between the group companies may adversely affect the credit rating issued to its NCDs.
5) Any volatility in interest rates could adversely affect its net interest margin, financial performance and results of operations.
6) Any default or late or non-payment by or from its customers could adversely affect its business, results of operations and financial condition. Any such defaults and late 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.
7) You can refer all risk factors in the Final prospectus of the company.
How to apply JM Financial Products NCD Issue of 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. The process of applying NCD would be through ASBA (Your amount would be blocked initially and upon allotment, your amount would be deducted and NCD unit allotment would be done, else your amount would be unblocked) You can reach out to any of the lead managers websites to know more details on how to apply them.
How JM Financial Products August 2019 NCD interest is taxed?
Since you need to apply through the demat form only, there would not be any TDS deduction on the interest paid on these NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the NCD interest as income in their income tax returns and pay income tax based on the individual tax bracket.
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When these JM Financial Products NCD’s of 2019 would get listed on BSE?
These JM Financial Products Limited NCDs of August, 2019 would get listed after 6 working days from the date of closure.
Should you invest in JM Financial Products NCD of August 2019?
Here are my few thoughts.
We are seeing NBFC companies delaying re-payments to the existing NCD holders. This company is still offering higher interest rates for these NCDs as NBFC companies are finding difficult to get credit/loans in India. NBFC Sector is a high risk sector now for any investments. I would advise investors to stay away from such high risk NCDs now. You can invest in some of the good large cap funds or consistent performing Multicap Mutual Funds that can provide high returns though not guaranteed.
Readers, do you feel these NCDs are worth investing?
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JM Financial Products NCD August 2019 Review