10% JM Financial Products NCD Feb 2020 – Should you invest?
JM Financial Products NCD February 2020 Review
JM Financial Products NCD of Tranche III would open for subscription on 13th February, 2020. 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% per annum and attracting investors now. It is offering NCDs of 24 months, 40 months, 60 months and 120 months. Should you invest in JM Financial Products NCD of February 2020 – Tranche III? What are the risk factors an investor should consider before investing JM Financial Products NCD of 2020?
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 February 2020 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 200 Crores over subscription totaling to Rs 300 Crores. It comes with 10 different options, which has 24 months, 40 months, 60 months and 120 months tenure NCDs.
What does Secured NCDs mean?
They are offering secured NCD’s now in February 2020. 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 February 2020 Tranche III issue details
Issue start date: 13-February-2020
Issue end date: 9-March-2020
NCD’s are available in 10 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.
Interest rates on February 2020 NCD’s of JM Financial Products
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 revenues increased from Rs 891.95 Crores in FY2018 to Rs 949.03 Crores in FY2020. Its revenues for Qtr ending Dec-19 are at Rs 215.4 Crores compared to previous Qtr ending Sep-19 at Rs 198.6 Crores.
2) Its profits increased from Rs 109.04 Crores in FY2018 to Rs 204 Crores in FY2020. Its profits for Qtr ending Dec-19 are at Rs 45.6 Crores compared to previous Qtr ending Sep-19 at Rs 31.4 Crores.
Why to invest in JM Financial Products Ltd NCD?
1) Attractive interest rates where one can get up to 10% 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/Stable.
What are the objectives 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 February 2020 NCD of Tranche III?
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) As on December 31, 2020, real estate segment comprised 26.9% (excluding impact of IND AS adjustments) of total loan book. The networth of JMFCSL has increased due to capital infusion in September 28, 2018. With an increase in its net worth, JMFCSL may reduce its dependence on the Company for loans in the real estate sector. This may result in a decline in the real estate loan book of the company which may adversely impact business operations and profitability.
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 2020?
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 February 2020 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.
You may like: Is old income tax regime is beneficial to you?
When these JM Financial Products NCD’s of 2020 would get listed on BSE?
These JM Financial Products Limited NCDs of February, 2020 would get listed after 6 working days from the date of closure.
Should you invest in JM Financial Products NCD of February 2020?
These NCDs are secured in nature and offer high interest rates. However, investing in NCDs in NBFC companies is a high risk in the last few quarters. Investing in NCD’s for long term of 10 years would be more risky. Since it offers 2 years to 5 years tenure NCDs also, high risk investors can invest in these NCDs. One can ignore 10 years NCDs as we do not know how the company would perform in the long run.
Alternatively, you can invest in a diversified portfolio of mutual funds that can provide high returns with similar risk though not guaranteed.
Readers, do you feel these NCDs are worth investing?
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JM Financial Products NCD February 2020 Review