Arka Fincap NCD Dec-2023 issue – Introduction
Arka Fincap Ltd (erstwhile Kirloskar Capital Ltd) has come up with a secured NCD issue that will open for subscription on December 7, 2023. Arka Fincap Limited is an NBFC primarily engaged in providing structured term financing solutions in India. These NCDs offer interest rates of up to 10% and are issued in 6 different series with a tenure of 24 to 60 months. Should you subscribe to the Arka Fincap NCD issue of the December 2023? What are the risk factors one should consider before investing in such high-risk NCDs?
Also Read: Muthoot Mercantile Dec-23 NCD offers 10.5% interest rates
About Arka Fincap Limited
Company is a NBFC-ML registered with RBI. They are a professionally managed organization part of the Kirloskar Group, primarily engaged in providing structured term financing solutions to corporates, real estate and urban infra financing, loans to micro, small and medium enterprise and personal finance loans to borrowers in India.
They operate four principal lines of business, namely
- Corporate lending
- Real estate and urban infra financing
- MSME lending and
- personal lending.
Its total Loan Book as of September 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021 was ₹ 4,03,319.32 lakhs, ₹ 3,96,027.04 lakhs, ₹ 2,37,987.91 lakhs and ₹ 1,12,433.35 lakhs, respectively.
Arka Fincap NCD Dec-2023 – Issue Details
Here are the details of Arka Fincap NCD Tranche-I issue.
| Subscription opening Date | 07-Dec-23 |
| Subscription closure Date | 20-Dec-23 |
| Issuing Security Name | Arka Fincap Limited |
| Security Type | Secured, Rated, Listed, Redeemable, Non-Convertible Debentures |
| Issue Size (Base) | Rs 150 Crores |
| Issue Size (Option to retain over subscription) | Rs 150 Crores |
| Total issue size | Rs 300 Crores |
| Issue price | Rs 1,000 per bond |
| Face value | Rs 1,000 per bond |
| Series | Series I to VI |
| Minimum Lot size | 10 bonds and 1 bond there after |
| Tenure | 24, 36 and 60 Months |
| Interest Payment frequency | Monthly and Annual |
| Listing on | Within 6 working days on BSE |
| Lead Manager | JM FinancialLimited and Nuvama Wealth Management Limited |
| Debenture Trustee/s | Catalyst Trusteeship Limited |
Arka Fincap NCD Dec-2023 – Interest Rates
| Series | I | II | III | IV | V | VI |
|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Quarterly | Annual | Quarterly | Annual | Quarterly | Annual |
| Tenure (Months) | 24 | 24 | 36 | 36 | 60 | 60 |
| Coupon (% per Annum) | 9.00% | 9.30% | 9.30% | 9.65% | 9.65% | 10.00% |
| Effective Yield (% per Annum) | 9.29% | 9.29% | 9.62% | 9.64% | 9.99% | 9.99% |
| Amount on Maturity (In Rs.) | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 |
Arka Fincap NCD Credit Ratings
These NCDs are rated as CRISIL AA-/Positive Outlook by CRISIL Ratings Limited.
These ratings indicate that instruments with this rating are considered to have a high degree of safety regarding the timely servicing of financial obligations and carry very low credit risk.
Arka Fincap Limited – Financials
| Period Ended | 31-Mar-22 | 31-Mar-23 |
|---|---|---|
| Revenue | 203.09 | 372.88 |
| Profit After Tax | 32.51 | 61.36 |
Arka Fincap NCD Dec-2023 – Why to invest?
- These NCDs offer attractive interest rates of up to 10%, providing a yield of up to 10% per annum. Currently, banks and financial institutions are offering lower rates in comparison, making these NCDs an appealing investment option.
- The company has good revenue and margin growth in the past. Investors are advised to consider NCDs from companies that are growing in terms of revenues and margins.
- These NCDs are available in 6 different series, giving investors the flexibility to choose a series that best suits their preferences
Also Read: 10.5% IIFL Samasta Finance NCD Dec-2023 issue
Arka Fincap NCD Dec-2023 – Risk Factors
Here are the risk factors of investing in these bonds.
- Any downgrade in its credit ratings may increase interest rates for raising new debt, refinancing its outstanding debt which would increase the financing costs of the company.
- Its customers may default in their repayment obligations, which may result in increase in the levels of Gross Stage 3 assets in its AUM and that could have an adverse impact on its business.
- Its Loan Book comprises of unsecured loans. Its inability to recover the amounts due from customers in connection with such loans in a timely manner could adversely affect its operations and profitability.
- Its business requires substantial capital, and any disruption in funding sources would have a material adverse effect on its liquidity, cash flows and financial condition.
- They are vulnerable to the volatility in interest rates, and may face interest rate mismatches between its assets and liabilities in the future which may cause liquidity issues.
- Investors are advised to refer to the Arka Fincap NCD Dec-23 RHP prospectus for a complete understanding of the risk factors.
Arka Fincap NCD Dec-2023 – Should you Invest?
Arka Fincap NCD Tranche-I offers high-interest rates up to 10%, which are higher than the current interest rates offered by banks and financial institutions. These secured NCDs provide preference to NCD investors in the event of any financial crisis or company shutdown, ensuring prioritized payment of interest and capital repayment. Rated as AA- by CRISIL these NCDs hold a favorable rating.
On the downside, it is essential to consider the historical issues of NBFCs delaying interest payments and capital repayment, with occasional cases of defaults. Additionally, credit ratings are subject to change. Investors are advised to thoroughly review all risk factors outlined in the RHP.
High-risk investors who understand these factors may invest in these NCDs.
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