12% KLM Axiva Finvest NCD bonds June 2020 – Should you invest?
KLM Axiva Finvest NCD bonds June 2020 Review
KLM Axiva Finvest is coming up with secured NCDs that would open for subscription on 2nd June, 2020. These NCDs offer interest rates up to 12% and yield up to 12.4%. This Non Banking Finance Company is operating from Kerala with registered office in Hyderabad and has a presence across South India. In these NCDs, your investment would get doubled in 75 months compared to Banks where your money would get doubled in more than 120 months. What are the risk factors you should consider before investing in such NCD’s? Should you invest in KLM Axiva Finvest NCD or avoid?
About KLM Axiva Finvest Limited
They are a non-deposit taking systemically important non-banking finance company primarily serving low and middle income individuals and businesses that have limited or no access to formal banking and finance channels. They operate primarily in four business verticals: (i) gold loan business, lending money against the pledge of household, jewelry, (ii) micro, small and medium enterprises loan, (iii) personal loan and (iv) micro finance loan to women customers. As on March 31, 2020, they operate through 174 branches across four states namely Kerala, Karnataka, Tamil Nadu and Telangana managed through the corporate office located in Kochi.
KLM Axiva Finvest NCD 2020 Issue Details
Here are the issue details of these NCDs.
Start date: 2-June 2020
End date: 25-June-2020
It offers secure NCDs.
These NCD’s have monthly, yearly and cumulative interest payment options.
It offers both secured NCD’s for 400 days, 18 months, 2 years, 3 years, 5 years and 75 months.
Bond face value is Rs 1,000.
Minimum investment is for 5 bonds mean, you need to invest for a minimum of Rs 5,000. Beyond this you can invest in multiples of 1 bond.
These NCD bonds would be listed on BSE. Hence, these are liquid investments (provided the buyer is available on that date when you sell such NCD’s).
NCD’s can be invested through Demat account only.
Non-resident Indians (NRI’s) cannot invest in these NCD’s.
The issue size is Rs 100 Crores with an option to retain another Rs 25 Crores aggregating to Rs 125 Crores.
Vivro Financial Services is the Book Running lead Manager for this issue.
KLM Axiva Finvest NCD Interest Rates
Credit Ratings of KLM Axiva Finvest NCD 2020
These NCDs have been rated as CARE BB+; Stable by Care ratings. The rating of NCDs from CARE Ratings indicates that instruments with this rating are considered to have a moderate risk of default regarding timely servicing of financial obligations
How returns from KLM Axiva Finvest NCD is taxed?
For investors who are applying through demat account, there would not be any 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 in their income tax return and pay necessary income tax.
How are company financials?
It earned revenues of Rs 25.8 Crores for FY18 and Rs 66.5 Crores for FY19. Its revenues are at Rs 50.7 Crores for 6 months ended Sep-19. FY20 full year numbers are not available.
Its profits are Rs 1 Crores for FY18 and Rs 2.2 Crores for FY19. Its profits are at 6.9 Crores for 6 months ended Sep-19.
Net Non Performing Assets (NPA) are at 8.1% as on 30th September, 2019.
What are the objects of the NCD issue?
Here are the objects of the offer.
1) For the purpose of onward lending, financing and repayment/prepayment of principal and interest on existing borrowings.
3) General Corporate Purposes
Why to invest?
1) It offers secured NCDs. Secured NCD’s are secured by movable assets, including book debts, receivables, etc. Means in case company gets windup due to bad performance of the company, investors of NCD would get preference in re-payment of the principal. However, there could be delays. Hence it is relatively safe to invest in such secured NCD’s.
2) Attractive interest rates up to 12% and yield up to 12.4%.
3) You can double your money in 75 months with these NCDs.
Why not to invest?
1) The company revenues and profits are small in size.
2) Spread of COVID-19 pandemic and the consequent nationwide lockdown to impact its operations and financial condition.
3) They have received Show-Cause Notice from RBI and any adverse action taken could affect its business and operations.
4) Its financial performance is particularly vulnerable to interest rate volatility. If they are unable to manage interest rate risk in the future it could have an adverse effect on net interest margin, thereby adversely affecting business and financial condition of the company.
5) Complete risk factors of KLM Axiva Finvest NCD of June 2020 can be read at risk factors indicated in the prospectus.
How to invest in these NCD bonds?
You can login to your demat account and apply under IPO/NCD/NFO section. These NCDs would get listed within 6 working days from the closure of the NCD subscription.
Should you invest in KLM Axiva Finvest NCD bonds of 2020?
They offer secured NCDs. Secured NCDs offered by them have high interest rates / yield. However the company has low credit rating of BB+. Investing in NCDs in NBFC companies is high risk now and investing in low credit rating companies is very high risk. You should stay away from putting your hard earned money in such low credit rating NCDs. You can check for some of the quality NCD’s that keep coming to market. Alternatively, you can check for some of the best SIP mutual fund plans in India.
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KLM Axiva Finvest NCD June 2020 Review