Wint Wealth Bricks May 2021 - Covered Market Linked Debentures (MLD) – Review

9.5% Wint Wealth Bricks May 2021 – Covered Market Linked Debentures (MLD) – Should you invest?

Wint Wealth Bricks May 2021 - Covered Market Linked Debentures (MLD) – ReviewWint Wealth Bricks May 2021 – Covered Market Linked Debentures – Review

Wint Wealth (Zerodha backed alternative debt asset platform) has launched Bricks May 2021 Covered Market Linked Debentures which offers high returns. These debentures are covered by collateral properties. While the concept looks good, there are several ifs and buts while investing in this cover linked bonds. What is this Wint Bricks May 2021 covered market linked debentures all about? Should you invest in Wint Wealth Bricks May 2021 Covered Market Linked Debentures that offer 9.5% interest rate? Is it safe to invest in Wint Bricks Covered Market Linked Debentures?

About Wint Wealth

You would not have heard much about this company till few days back. This company suddenly came into limelight saying it is offering Covered Market Linked Debentures which are covered bonds that offers 9.5% returns per annum which is safe investment option.

Wint Wealth is a fixed income platform where you can invest in fixed income products that give better returns than debt funds or fixed deposits. Company website indicate that it was formed after seeing huge gap between low-risk low return vs high risk high return investment options. Can investors get moderate returns to high returns with risk is between high and low (like moderate).

Company was founded by some of the members from IIT and as per company website it says it is backed up by big shots like Nithin Kamat (Zerodha), Kunal Shal (CRED), Praniv Yadav (Paytm money) etc.

It started offering market linked debentures (MLD) from 2020 onwards. Till now it has issued 3 Covered Market Linked Debentures and 1 covered bond / market linked debenture is in progress.

Key Features of Wint Wealth Bricks May 2021 – Covered Market Linked Debentures

Wint Bricks May 2021 is the name of the product offered by Wint Wealth.

Win Bricks May 2021 asset is launched on 31-May-2021.

These Covered Market Linked Debentures are issued by its partner Ugro Capital Limited, NBFC company through Wint Wealth. Means, Wint Wealth is working as a mediator / broker for such transactions.

The tenure of these Covered Market Linked Debentures are 18 months i.e., maturity date is 25-Nov-2022.

Pre-tax returns are expected at 9.5% per annum.

This is tax efficient product where one need to pay only 10% on the returns if investor holds for > 12 months. These are taxed like equity.

This asset has an underlying collateral of property of loans which is minimum of 1.25 times the issue of Covered Market Linked Debentures. The size of the issue is Rs 20 Crores and collateral size is Rs 25 Crores (1.25x).

Interest would be paid on maturity after 18 months.

Minimum investment in Wint Bricks May 2021 asset by retail investors is Rs 10,000.

NBFC Ugro Capital (on behalf of whom Wint Wealth is issuing these MLD), is rated as A (Stable) by Acuite Ratings.

How to invest in Wint Wealth Bricks May 2021 Covered Market Linked Debentures?

You can follow below steps:

Visit winwealth.com

Visit Win Wealth Bricks May 2021 asset link

Visit the block where it says “Start Investing”

Select the no. of lots you want to invest

Click on “invest now”

Enter your phone number and enter OTP (if you already logged in, skip this and next line item)

Enter your name and email ID and click on sign-up

Enter your KYC details. This includes Demat account no, bank account number, IFSC code etc., Your interest payment would be paid to this bank account number. It would look like below screen.

Win Wealth Bricks May 2021 - How to invest - KYC and details

It takes you to couple of more steps and to your bank account where you need to transfer funds.

The process might have couple of more steps to finish.

Who is U Gro Capital?

This debenture bonds are issued on behalf of U Gro Capital, hence it is important to understand the company. U Gro Capital is BSE listed technology company which focuses on addressing capital needs of small businesses operating in select sectors with customized loan solutions.

Company has been rated as A (Stable) by Acuite Ratings. Here is the AUM, Gross NPA and Net NPA of the company.

Wint Bricks May 2021 - About U Gro Capital AUM, Gross NPA and Net NPA

How does this asset compare to other alternative options?

Wint Bricks May 2021 - Compared to alternatives

Did Wint Wealth offered such debenture bonds earlier?

Yes. They have offered following market linked debentures in the recent past.

1) 10% Wint Gold Aug 2020 – Offered by IIFL NBFC that has maturity in Feb-2021. These are repaid back now.

2) 11% Wint Gold Dec 2020 – Maturity in June-2022. These are 100% subscribed.

3) 10.25% Wint Wheels Mar 2021 for Rs 20 Crores Maturity in Mar-2023. These are 100% subscribed.

What is the Cover Pool / Collateral of the bonds?

The cover pool is characterized across regions and assets.

Wint Bricks May 2021 - Cover pool of assets by region

Wint Bricks May 2021 - Cover pool of assets by industry

Why should you invest in Wint Wealth Bricks May 2021?

Here are some reasons to invest:

1) This asset would provide high returns of 9.5% per annum. If you observe, debt funds or bank fixed deposits offer low returns of 5% to 7%.

2) Investors can invest as low as Rs 10,000 and enjoy high returns.

3) This is tax efficient investment option. Investors need to pay only 10% tax if held for > 12 months. The post-tax returns would be 8.55% per annum. If investors hold for < 12 months, the returns are taxed as per income tax slab applicable to them.

Why NOT to invest in Wint Wealth Bricks May 2021 Covered Market Linked Debenture Bonds?

Here are few negative or hidden factors of this instrument.

1) There is credit risk in this investment option. While these instruments are covered by pool of assets, in case the NBFC company goes bankrupt, the process of liquidation of these assets might take longer time. One should recall what happened to DHFL secured NCD bonds investors. They are still waiting for their investments to be returned along with interest.

2) There is liquidity risk in this option. You cannot sell them in the open market or to Wint Wealth before maturity. However, Wint Wealth gives an option to withdraw and if new buyers are available, these would be transferred to them.

3) Remember that in case the lender goes bankrupt, investors would get their investment along with interest in maximum period of 96 months. However, investors can get interest of 13.5% instead of 9.5% in case of such event for the extra period.

4) There could be fraud risk in this covered bond. While it shows there are underlying collateral properties, but these might not exist. In such a case, investors can lose money.

5) The credit rating of this debt instrument is A (Stable) by Acuitie Ratings which is very low. Such ratings can further fall to “B” without any advance intimation to investors. Investors should always invest in AAA rated bonds which are one of the safe investment options.

Should you invest in Win Bricks MLD May 2021 Debenture Bonds offering 9.5% returns?

These Covered Market Linked Debentures (MLDs) are relatively new to retail investors. These debenture bonds offer 9.5% pretax returns and 8.55% post tax returns (if held for > 12 months). These debenture bonds have collateral cover of properties. This asset class is relatively new. The size of the issue is Rs 20 Crore only which is small and retail investors might not get allotment. Investors should be little cautious and understand all these risks before investing in such high-risk investment options.

Have you liked our tips and analysis? Then share it on your Facebook, Twitter, Telegram and other social media which might be useful to your friends too.

Suresh KP

20 thoughts on “9.5% Wint Wealth Bricks May 2021 – Covered Market Linked Debentures (MLD) – Should you invest?”

  1. Can we ask wintwealth to make the collateral papers public on its portal?
    This will develop trust on wintwealth before investing!

      1. Let me share my last experience with WintWealth.
        After I read about your last blogpost on a product offering – Wint Wheels March 21, I wrote a number of emails to them. After some mails evading a direct reply, finally, what they told in writing through email is, and, I am quoting from their reply ” (1) The SPV will be managed by Catalyst trusteeship and in case of a credit event: First in line of ownership structure are retail bond investors, and second in line is NBFC.
        2. The services rendered by the SPV are arranged by us, so you don’t need to worry about their charges”.
        So effectively this is “pass-through” arrangement, where in there is “no risk whatsoever at all of any kind” of the Wint owners/promoters/SPV or whatever it is. All kinds of risks, whether interest payment or principal, is entirely borne by the “retail bond investors, firstly, and secondly by the issuing NBFC (this NBFC bearing the loss is natural because they are the issuing entity).
        They have not shared what charges they will charge and they have very clearly written that “you don’t need to worry about their charges”.
        The NBFCs on whose behalf they issue such MLDs are very obscure, small, with no/less history/legacy behind them and even the credit ratings arranged by them, are not from the nationally recognized ones, like, ICRA, Fitech, Crisil, etc.
        So clearly there are lots of gaps in the entire structure and offering.
        I am extremely grateful to Mr. Suresh KP to have clearly highlighted the negatives of these kinds of offerings.

        1. Kamalji, Good to hear about posting your interaction with Wint Wealth customer sup0port.

          I tried to get hold of them before writing the article, but unfortunately, I could not get any response from them. Glad that they have responded to you.

          Yes the risk lies between retail investors and end company. Wint is only third party facilitating this. Beyond what I indicated in the article, there are several other risks as the returns would depend on market condition. These are still at initial stages, one need to avoid at this point of time

  2. Hi Suresh, looks like this MLD is fully subscribed. Is Wint Wealth only company to provide such product at this time or is there any other MLD available to subscribe?

    1. Obviously it would subscribe as it is small issue of only Rs 20 Crores. We would keep posting new covered bonds on our blog as and when these come. You can subscribe to email subscriptions to get these tips to your mail box

  3. Great analysis. I was attracted to the issue and searched for reviews. Finally found a review that gives balanced review. Thanks.

  4. Hi Suresh,

    This is a great article. First and foremost, yes this is a risky product.
    However, since this is a new product in India, I would like to suggest few points with respect to this article to better inform readers of MyInvestmentIdeas;

    It would be good to inform readers about collateral bonds and what is meant by Market Linked Debentures;

    1. Collateral Bond: In collateral Bonds the loan granted by the issuer NBFC, in this case U Gro Capital, is held as collateral by the lender (in this case the investor through Wint Wealth). In case of default, the NBFC is bypassed and money recovered directly from these loans by the issuer (Wint wealth). This provides additional cover for one Risk i.e. if NBFC goes bankrupt, the principal and interest is directly recovered from the loan portfolio which is held as collateral. However, a different risk exists in that in case the loan portfolio turns into NPA’s or is fraudulent, then the recovery of principal (and interest) will be a problem.

    2. Market Linked Debenture (MLD): In case of MLD, on maturity, apart from the initial principal component, there is a pay-off (i.e interest). This pay-off (interest) depends on the movement of a security or index (Like Nifty 50 or Sensex etc.)), as defined initially in the terms of the MLD. The principal component would be fully paid irrespective of market movement. For example, lets say there is MLD which offers 10% interest (Called pay-off in MLD terms) and the terms of MLD state that the interest will be paid only if Nifty stays above 3000 level. At maturity if Nifty is above 3000, then you get both principal and interest. However if Nifty goes below 3000 then you get only your principal and not the interest.

    3. One advantage of MLD in India is that, it is treated as equity and not debt for taxation purpose (since it is conditional to performance of equity/index as stated above). Hence, in India, in case we hold an MLD for more than 1 year then the applicable tax rate will be 10% (if LTCG exceeds 1 Lakh in the financial year)

    There is one additional risk which needs to be mentioned i.e. the MLD Risk. Since the product (Wint Wealth Bricks May 2021) is a Market Linked Debenture, if the Sensex falls below 10127 from the current approx 50,000 level, then you will get only your principal back and not the interest. Principal will be repaid even if Sensex goes below 10127. For details, please check the FAQ section subheading “What is the taxation on this?” In the Wint Wealth Bricks May 2021 asset details page on Wint Wealth website.

    Disclosure: I am an investor in Wint Wealth products but not affiliated to the company in any other way.

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