11% Wint Wealth Gold Jun21 – Covered Market Linked Debentures (MLD) – Should you invest?
Wint Wealth Gold Jun21 – Covered Market Linked Debentures (MLD)
Wint Wealth (Zerodha backed alternative debt asset platform) has come up again with one more covered market linked debentures i.e., Wint Gold Jun 2021 which offers high return of 11%. These debentures are covered by collateral properties. Like we indicated earlier, while the concept looks good, there are several risks associate while investing in such cover linked bonds. What is this Wint Gold Jun21 covered market linked debentures all about? Should you invest in Wint Wealth Gold Jun 21 Covered MLDs that offer 11% interest rate? Is it safe to invest in Wint Gold Covered Market Linked Debentures?
Overview about Wint Wealth
This company has come-up into limelight recently by issuing covered bonds. Many of us would not heard much about this company till their last Bricks covered bonds issued by them in May 2021. This company is now offering Gold covered Market Linked Debentures which are covered bonds that offers 11% returns per annum indicating this as one of the safe investment options.
Company website indicate that it was formed after seeing huge gap between low-risk low return vs high risk high return investment options. It wants to enable various investment options and see if investors can get moderate returns to high returns by taking high and low risks.
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 4 Covered Market Linked Debentures and 1 covered bond / market linked debenture (current one) in progress.
What are covered bonds?
Covered bond is a secured bond that comes with bankruptcy protection. When such covered bond is linked with market it is called covered market linked debenture (MLD). Investors would get interest and repayment of capital till such time NBFC does not declare bankruptcy. If NBFC goes bankruptcy, the repayment would be done with the covered assets to protect investors.
Features of Wint Gold Jun21 – Covered MLDs
Wint Gold Jun21 is the name of the product offered by Wint Wealth.
Wint Bricks Jun 2021 asset is being launched on 21st June 2021 at 12 noon. Detailed documentation would be available in next few days.
These Covered Market Linked Debentures are issued by its partner Dhanvarsha Finvest, NBFC company through Wint Wealth. Means, Wint Wealth is working as an intermediary for such bonds.
The tenure of these Covered Market Linked Debentures are 15 months i.e., maturity date is 9-Sep-2022.
Pre-tax returns are expected at 11% 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 15 Crores and collateral size is Rs 18.75 Crores (1.25x).
Interest would be paid on maturity after 15 months by NBFC directly.
Minimum investment in Wint Gold Jun21 asset by retail investors is Rs 10,167 and in multiples of Rs 10,167 each.
Dhanvarsha Finvest (on behalf of whom Wint Wealth is issuing these MLD), is rated as BBB (Stable) by Infomerics Valuations and Ratings. These ratings are not disclosed on Wint Wealth website. Even on Infomerics website such ratings are hidden.
How to invest in Wint Wealth Gold Jun 21 Covered Market Linked Debentures?
You can follow below steps:
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 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.
About Dhanvarsha Finvest (NBFC)
These debenture bonds are issued on behalf of Dhanvarsha Finvest; hence it is important to understand about the company.
Dhanvarsha is BSE listed NBFC company operating from Mumbai which offer different types of loans like Loan against property, Business Loan, Personal Loan, Education Loan, Medical Loan, etc.
AUM of the company is Rs 104 Crores.
Its Gross NPA is 2.95% and net NPA is 0.82%.
Company has been rated as BBB by Infomerics Valuations and Ratings.
How does this asset compare to other alternative options?
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.
4) 9.5% Wint Bricks May 2021 for Rs 20 Crores maturity in Nov-2022. These are 100% subscribed.
Why should you invest in Wint Wealth Gold Jun 2021?
Here are some reasons to invest:
1) This asset would provide high returns of 11% 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 9.9% 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 Gold Jun 2021 Covered Market Linked Debenture Bonds?
Here are few negative or hidden factors of this instrument.
1) The credit rating of the company is BBB (Stable) by Infomerics Valuations and Ratings is low. Such ratings can further fall without any advance intimation to investors. Investors should always invest in AAA rated bonds which are one of the safe investment options.
2) 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 paid back to them along with interest.
3) 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.
4) Remember that in case the lender goes bankrupt, investors would get their investment along with interest in maximum period of 24 months. However, investors can get interest of 13.5% XIRR instead of 11% in case of such event for the extra period.
5) 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.
Should you invest in Wint Wealth Gold Jun 2021 Covered MLDs offering 11% returns?
These Covered Market Linked Debentures (MLDs) are relatively new to retail investors. These Wint gold debenture bonds offer 11% pretax returns and 9.9% post tax returns (if held for > 12 months). These debenture bonds have collateral cover of properties. This asset class is relatively new. The underlying company credit rating is BBB which is low and high risk. The size of the issue is Rs 15 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.
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