Edelweiss Financial Services NCD – August 2021 - Review

9.7% Edelweiss Financial Services NCD – August 2021 – Review

Edelweiss Financial Services NCD – August 2021 - Review9.7% Edelweiss Financial Services NCD – August 2021 – Review

Edelweiss Financial Services is coming up with secured NCD bonds now. These bonds would open for subscription on 17th August, 2021. Edelweiss Financial Services is a leading investment banking company which has diversified businesses across retail, corporate credit, wealth management etc. NCD interest rates are up to 9.7%. These NCDs are offered for the term of 36 months, 60 months and 120 months. These interests are paid either monthly, annually or on maturity depending on the option chosen by an investor. Should you invest in Edelweiss Financial Services NCDs of August, 2021? What are the risk factors one should consider before investing in such high risk NCDs? Let me provide Edelweiss Financial Services NCD review in this article.

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About Edelweiss Financial Services Limited

This investment banking company, through its subsidiaries has diversified its businesses to include credit, including retail and corporate credit, wealth management, asset management, asset reconstruction and insurance including life and general insurance businesses, which are conducted through its subsidiaries. They believe that its research driven and client-centric approach and consistent ability to capitalize on emerging market trends has enabled them to foster strong relationships across corporate, institutional (both domestic and international), high net worth individuals and retail clients. They have a pan-India and international network with approximately 339 offices, including two corporate offices in Mumbai and 10 international offices, in approximately 145 cities in India and six international locations and employed over 9,200 employees.

Edelweiss Financial Services NCD August 2021 – Issue Details

Subscription opens on 17-August-2021

Subscription closes on 6-September-2021

These are available in 8 different options. The tenures for these NCDs are for 36 months, 60 months and 120 months.

Edelweiss Financial Services NCD interest rates are up to 9.7% for retail investors.

It issues secured NCDs.

Edelweiss NCD interest payment is payable monthly, annually or on maturity depending on the option chosen by the NCD investor.

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 within 6 working days from the issue closure date. Hence these are some what liquid investments.

These are allotted on first come first serve basis. Hence the issue can be closed before this date if it is oversubscribed before the closure date.

NRI’s cannot apply to this NCD subscription.

The base issue size for August, 2021 NCD issue is Rs 200 Crores with an option to retain over subscription up to Rs 200 Crores totaling to Rs 400 Crores.

Edelweiss Broking Ltd is the lead manager for the issue.

Edelweiss Financial Services  NCD Product Note – August, 2021

Interest rates of Edelweiss Financial Services – August, 2021 NCD

Edelweiss Financial Services NCD - August 2021 - Interest rates, Coupon rates and Yield

What are the credit ratings for these NCDs?

These NCDs are rated as Acuite AA – Outlook: Negative and ICRA A+ (Negative). NCD instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

These NCDs are rated as Acuite AA – Outlook: Negative and BWR AA-/ Stable. NCD instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

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Edelweiss Financial Services NCD – Who is eligible to apply?

This NCD issue is open to all Indian residents, HUFs, HNIs and Institutions.

Category I – Institutional Investors – 10% of the overall size is reserved.

Category II – Non-Institutional Investors (including companies) – 10% of the overall size is reserved.

Category III – HNIs – 40% of the overall size is reserved.

Category IV – Retail Investors – 40% of the overall size is reserved.

How is the company doing in terms of profits?

Here are the details of consolidated profits of the company.

Year ending Mar-2019 – Profit of Rs 1,101 Crores

Year ending Mar-2020 – Loss of Rs 1,571 Crores

Year ending Mar-2021 – Profit of Rs 2,521 Crores

Why to invest in these Edelweiss Financial Services NCD?

Let us review the positive factors in this NCD issue.

1) This NCD offer attractive interest rates where investors can get interest up to 9.7% per annum.

2) It issues secured NCDs. Its secured NCDs are safe compared to unsecured NCDs. In case company gets wind-up/shut down for some reason, secured NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence it is safe to invest in such secured NCD options.

Why not to invest in Edelweiss Financial Services NCD?

Let us review some of the negative factors or risk factors in this NCD issue.

1) The company has incurred losses in FY2020. If such situation arises in future, company might struggle to pay interest to the NCD holders.

2) The financial industry is becoming increasingly competitive. This creates significant pricing pressures for such companies to retain existing customers and get new business. Its growth will depend on its ability to compete effectively in this environment.

3) Current difficult conditions in financial markets can adversely affect its business, which could materially reduce its revenue and income.

4) Refer prospectus for complete risk factors.

How the returns from Edelweiss Financial NCDs are taxed?

1) The interest received from these NCDs are taxable. This interest income needs to be shown in “Income from other sources” in ITR and pay income tax based on income tax slab applicable to individuals.

2) If these NCDs are sold on stock exchange before maturity, there could be capital gains (issue price vs selling price of the bond).

If such bonds are sold within 1 year, one need to add pay income tax based on individual tax slab.

If such bonds are sold after 1 year, but before maturity, one need to pay long term capital gains of 10% without indexation or 20% after indexation.

How to apply Edelweiss Financial Services NCD?

This 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. Application forms can be downloaded on the lead manager web site. For more information on this you can refer prospectus.

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Is it safe to invest in Edelweiss Financial Services NCD?

Investors might be thinking whether it is safe to invest in these NCDs?

These NCD’s offer high interest rates. Banks are offering low interest rates, hence investors would get tempted with such NCDs that are offering high interest rates. These NCDs are rated as Acuite AA (Outlook: Negative) by Acuite Ratings and ICRA A+ (Negative) by ICRA Ratings. However, such credit ratings may change in future without any notice. One should always invest in AAA rated NCDs if they are looking for safe NCD investments. High risk investors can invest in these secured NCDs and get high returns.

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Suresh KP

21 thoughts on “9.7% Edelweiss Financial Services NCD – August 2021 – Review”

  1. Thank you for your insight Suresh Ji, what would be your suggestion for someone in their 40s looking to invest in some debentures, would this be a recommendation? or is sticking to schemes like the post office 5yr return of 6.7% more advisable? either way, I am only going to be putting a small amount (lakhs) of my capital, so what is your outlook and suggestion, a great article btw.

    1. Hello, this depends on your risk appetite. If you are a high risk investor, still you can go for ‘A’ rated secured NCD bonds. If you want to invest for long term of say 8+ years, you can always invest in mutual funds. It has variety of categories who can invest based on their risk appetite, how long they want to invest and for any specific financial goals. If you need any suggestions, you can provide the details here or mail me at suresh@my investmentideas.com, I can further assist.

      1. Suresh, How can a ‘A’ rated secured NCDs be labelled as high risk? It is quite frightening to imagine what you will be thinking of ‘B’ rated unsecured NCDs! Are only ‘AAA’ rated NCDs worth investing in for someone like me who needs High interest but does not have surplus cash to risk. Kindly advise.

        Vinay

        1. Just recall what happened to A Rated DHFL NCDs? After DHFL crisis, still investors are waiting for their money right? This is what I call “high risk” in company FDs or NCDs. Investing in AAA rated bonds can reduce the risk (while it would not eliminate the risk).

  2. If these NCDs face value reduced in market will it reduces the maturity value? coupon value? please explain.

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