8.85% Tata Capital Financial Services NCD Aug 2019 Review

Tata Capital Financial Services NCD Aug 2019Tata Capital Financial Services Limited is coming up with its Tranche-II NCD Issue that would open for subscription on 13th August, 2019. Tata Capital Financial Services non convertible debentures (NCD) interest rates are up to 8.85%.  Tranche-I in Sep 2018 had interest rates upto 9.1% which are reduced now. They are offering both secured and unsecured NCD now in Tranche-II. When interest rates are low, high interest rate NCDs from Tata Capital Financial Services Limited NCD news is attracting investors who want to invest for short term to medium term. Should you invest in Tata Capital Financial Services NCD issue in Aug 2019? What are the risk factors one should consider before investing in such high risk NCDs from Tata Capital Financial Services Limited?

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About Tata Capital Finance Limited


They are a Systemically Important Non – Deposit taking Non – Banking Financial Company focused on providing a broad suite of financing products customized to cater the needs of various segments. Their 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 was formed to manage the project finance portfolio of the erstwhile infrastructure finance division;

2) Consumer finance: The Consumer Finance and Advisory Business Division 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 the this NCD


Tata Capital Financial Services Subscription start date is 13-Aug-2019.

NCD Issue end date is 23-Aug-2019.

NCD’s are available in 4 options. It offers NCD for 3 years, 5 years, 8 years and 10 year tenure.

Coupon interest rates are between 8.35% to 8.85%.

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 500 Crores with an option to retain over-subscription up to Rs 3,626 Crores.

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

Tranche-II details can be downloaded at this link. 

Interest rates of Tata Capital Finance NCD Tranche II August 2019


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

Tata Capital Financial Services NCD Aug 2019 - Interest Rate

How the NCD issue is allocated to various investors?


1) Retail Portion – 35% of the issue

2) HNI – 35% of the issue

3) Qualified Institutional Portion – 15% of the issue

4) Corporate Portion – 15% of the issue

What are the credit ratings for these NCDs?


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

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

When Tata Capital Financial NCD Aug 2019 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 6 Working Days from the date of the Issue Closure.

How is the company financial performance?


Its consolidated profits are as below:

Year ended Mar-2017 – Rs 21,598 Lakhs

Year ended Mar-2018 – Rs 26,922 Lakhs

Tata Capital Financial Services NCD Aug 2019 – How the returns 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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Why to invest?


1) 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.

2) These NCDs offer attractive interest rates where you can get yield up to 8.85% per annum.

3) It issues Secured NCDs (Other than unsecured NCDs).  In case of any non performance of the company and the company gets closed for some reason, Secured 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.

4) Tata Capital Financial Services is part of Tata group which is trusted brand. One can invest in their NCDs for medium to long term too.

Why not to invest in Tata Capital Financial Services NCD Aug 2019?


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 indicated in the NCD prospectus.

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How to apply these Tata Capital Financial Services NCD in August 2019?


Tata Capital Finance NCD Issue 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. Tata Capital Finance NCD application form can be downloaded from book running lead managers website too. For more information on this you can refer prospectus.

Conclusion Summary: Tata Capital Finance Limited NCD’s of Tranche II issue in 2019 offers both secured and unsecured in nature. Banks are lowering the interest rates and the interest rates are still between 6% to 8% per annum, which are low compared to interest rates offered by 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 only for short to medium term. Don’t go for long term secured NCDs or unsecured NCDs as we do not know how the company would perform in the long run.

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Suresh

Tata Capital Financial Services NCD Aug 2019 Review

5 comments

  • Chetan Krishna Sangoram

    Great article, detailing all aspects, found it useful before investing.
    Please keep guiding us on various useful opportunities of investment in Indian market

  • tushar dalal

    THIS IS FURTHER TO MY TODAY’S MAIL.

    I SHALL BE THANK FULL IF ON FOLLOWING POINTS CLARIFICATION GIVEN:

    1) OBJECT OF THE PRESENT ISSUE.

    2) HOW MUCH FUND WILL BE INVESTED IN GROUP COMPANY VIZ. TATA MOTOR,
    TATA STEEL & OTHER GROUP COMPANY.

    AWAIT YOUR EARLY RESPONSE.

    THANKS

    TUSHAR DALAL

    • Hello Tushar, Here are the details 1) The objects of the issue is for onward lending, financing, and for repayment /prepayment of interest and principal of existing borrowings of TCFSL upto 75% and balance for corporate purpose. 2) There is no specific mention about in which company such funds would be invested other than repayment of borrowings.

  • TUSHAR DALAL

    DEAR SIR,

    I WOULD IKE TO KNOW WHAT IS THE SECURITIES OFFERED BY THE COMPANY AGAINST DEBENTURE SUBSCRIBE IS IT ONLY FUTURE RECEIVABLE OF THE COMPANY OR AGAINST THE ASSETS OF THE COMPANY IF SO WHAT IS ASSETS COVERAGE RATIO FOR CURRENT NCD. WHAT IS NET MARGIN THE COMPANY IS EXPECTED.

    AWAIT FOR YOUR IMMEDIATE RESPONSE TO ENABLE TO ME TO SUBSCRIBE OR NOT IN THE CURRENT NCD ISSUES.

    THANKS
    TUSHAR DALAL

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