10% Arka Fincap NCD Dec-2023 issue – Should you Invest?

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

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.

Suresh KP

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