9.7% Credit Access Grameen NCD – Aug-23 – Should you Invest?

Credit Access Grameen is coming up with secured NCD Issue that would open for subscription on 24th August, 2023. Credit Access Grameen is one of the largest microfinance institutions in India. Credit Access Grameen NCD interest rates are up to 9.7% and yield works out up to 10.13%. Should you invest in Credit Access Grameen NCD August, 2023 issue? What are the risk factors one should consider before investing in Credit Access Grameen NCD 2023 issue?

About Credit Access Grameen Limited

CreditAccess Grameen Limited (CA Grameen) is India’s largest microfinance institution. It is publicly listed on the NSE and BSE, and recognized by the Reserve Bank of India. The company is popularly known as “Grameen Koota” amongst its customers, translating to “rural group” in Kannada.

Credit Access Grameen NCD Aug-2023 – Issue Details

Subscription opening Date 24-Aug-23
Subscription closure Date 06-Sep-23
Issuing Security Name CreditAccess Grameen Limited
Security Type Secured, Redeemable and Non-Convertible NCDs
Issue Size (Base) Rs 400 Crores
Issue Size (Option to retain over subscriptoin) Rs 600 Crores
Total issue size Rs 1,000 Crores
Issue price Rs 1,000 per bond
Face value Rs 1,000 per bond
Series I to VIII
Minimum Lot size 10 bonds and 1 bond there after
Tenure 24, 33 and 60 months
Interest Payment frequency Monthly  and on maturity
Listing on Within 6 working days on BSE
Debenture Trustee/s Catalyst Trusteeship Limited

NRI’s cannot apply to this NCD subscription.

AK Capital Services is the lead manager for the issue.

Credit Access Grameen NCD Aug-23 Prospectus

Credit Access Grameen NCD Aug-2023 – Interest Rates

Series I II III IV V VI VII VIII
Frequency of Interest Payment Monthly Cumulative Monthly Cumulative Monthly Cumulative Monthly Cumulative
Tenure (in months) 24 24 33 33 50 50 60 60
Coupon (% per Annum) 9.10% NA 9.25% NA 9.40% NA 9.70% NA
Effective Yield (% per Annum) 9.48% 9.48% 9.64% 9.64% 9.81% 9.81% 10.13% 10.13%
Amount on Maturity (In Rs.) 1,000 1,198.82 1,000.00 1,288.12 1,000 1,477 1,000 1,621

Credit Access Grameen NCD Aug-2023 Ratings

These NCDs have been rated by Ind Ratings and Research as Ind AA-/ Stable to the extent of Rs 1,500 Crores.

The rating of these NCDs indicates that instruments with this rating are considered to have a low risk of default regarding timely servicing of financial obligations.

Credit Access Grameen NCD – Are these secured NCD bonds?

These are secured bonds.

The principal amount of the NCDs to be issued in terms of this Tranche II Prospectus together with all interest due and payable on the NCDs, shall be secured by an exclusive charge by way of hypothecation of identified book debts of the Company, created in favor of the Debenture Trustee, as specifically set out in and fully described in the Debenture Trust Deed, such that a security cover to the extent of 1.10 times of the outstanding principal amounts and interest thereon is maintained at all times as security until the Maturity Date.

How is the company doing in terms of profits?

Its consolidated profits are as follows:

Year ended Mar-2020 – Rs 335 Crores

Year ended Mar-2021 – Rs 127 Crores

Year ended Mar-2022 – Rs 353 Crores

Year ended Mar-2023 – Rs 826 Crores

Credit Access Grameen NCD Aug-2023 – Why to invest?

1) Company is one of the largest microfinance institution in India with established brand.

2) Company is earning consistent margins except for FY21 where one can attribute it due to covid. This indicates that this company has ability to consistently pay the interest rates for its creditors or NCD holders.

3) These NCDs offer attractive interest rates where you can get yield up to 10.13% per annum.

4) It issues Secured NCDs. In case of any non performance of the company and the company gets shut down for some reason, NCD investors would get preference in repayment of capital along with interest. Hence, it is safe to invest in such secured NCD options. However, it is only preference is given to NCD investors and no guarantee that entire amount would be paid-back in such cases.

Credit Access Grameen NCD – Why not to invest?

1) While company operations are in 14 states and 1 union territory, its major business is only in 3 states i.e. Karnataka, Maharastra and Tamil Nadu. Any adverse developments in these states can have a material impact on business.

2) Microfinance loans in general are unsecured with high risk. Increased NPAs can impact the profits of the company.

3) Investors should read all Internal and external risk factors indicated in the prospectus.

How to apply these NCD’s?

Credit Access Grameen NCD Issue is available in only in demat form. You can apply online or through any of the demat broker website where you are maintaining a demat account. For more information on this, you can refer prospectus.

Is Credit Access Grameen NCD safe?

Credit Access Grameen Aug-2023 NCD issue is rated by Ind Ratings as AA-/Stable. NCD bonds with such ratings are considered as low risk and safe for investments.

Credit Access Grameen NCD Aug-2023 Review – Should you invest?

Credit Access Grameen is a leading microfinance institution in India. Company is offering high interest rates in this NCD issue. It has a good credit rating of AA-/Stable from IND Ratings along with strong margin growth.

On the other hand, its business is concentrated only in 3 states, which is riskier. Credit ratings can change in the future.

High risk investors who understand all these risks can invest in such NCD Bonds.

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Suresh KP

4 comments

  1. Suppose the NCD issue is already oversubscribed more than two times in Retail category . Since allotment is on first come first serve basis , is there any use of applying now in retail category ? Or the application will just be rejected and amount refunded/unblocked ?

    1. It would be on first come first serve basis. e.g. I applied first and you applied 2nd. They will first allocate to me before proceeding to you. Once it is fully subscribed and amount would be unblocked / released.

  2. Is there any taxation on monthly interest payout option? In mutual funds, there is taxation on IDFW funds, and we receive the dividend after taxation. Does corporate bonds monthly interest have similar taxation?

    1. Interest below Rs 5,000 during financial year, no TDS
      All others, 10% TDS would be deducted if PAN is updated.
      If no PAN updated, 20% TDS would be deducted.

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