10% Credit Access Grameen NCD – Nov-22 – Should you Invest?
Credit Access Grameen is coming up with secured NCD Issue that would open for subscription on 14th November, 2022. Credit Access Grameen is one of the largest microfinance institution in India. These NCD interest rates are up to 10% and yield works out up to 10.46%. Should you invest in Credit Access Grameen NCD 2022? What are the risk factors one should consider before investing Credit Access Grameen NCD 2022 issue?
Also Read: This Largecap mutual fund generating highest SIP returns
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 – Issue Details
AK Capital Services is the lead manager for the issue. Here are the issue details.
|Security Type||Secured, Redeemable and Converted NCDs|
|Issue Size (Base)||Rs 250 Crores|
|Issue Size (Oversubscription)||Rs 250 Crores|
|Total Issue Size||Rs 1,500 Crores|
|Issue price||Rs 1,000 per bond|
|Face value||Rs 1,000 per bond|
|Minimum Lot size||10 bonds and 1 bond there after|
|Tenure||24 to 60 months|
|Interest Payment frequency||Monthly and Cumulative|
|Listing on||Within 6 working days on BSE/NSE|
Credit Access Grameen NCD Nov-22 Prospectus
Credit Access Grameen Limited NCD Interest Rates
CreditAccess Grameen NCD 2022 Ratings
These NCDs have been rated by Ind Ratings and Research as Ind AA-/ Stable.
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 I Prospectus together with all interest due and payable on the NCDs, thereof shall be secured by an exclusive charge by way of hypothecation of identified book debts of the Company, created in favour 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 of the NCDs and all interest due and payable thereon in respect of the NCDs is maintained at all times as security until the Maturity Date.
How is the company doing in terms of profits?
Its standalone profits are as below:
Year ended Mar-2020 – Rs 335 Crores
Year ended Mar-2021 – Rs 131 Crores
Year ended Mar-2022 – Rs 357 Crores
How the returns are taxed?
Since you need to apply through the demat form only, there would not be any TDS deduction on the interest paid on these NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the NCD interest as income on their income tax returns and pay income tax based on the individual tax bracket.
Credit Access Grameen NCD – Why to invest?
1) Company is one of the largest microfinance institution in India with established brands.
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 10.46% 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 2022 – 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) Other Internal and external factors can be read at the risk factors section of the NCD 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 NCDs are rated by Ind Ratings as AA-/Stable. NCD bonds with such ratings are considered as low risk.
Also Read: Which are mutual funds generating highest SIP returns in last 10 years?
Credit Access Grameen NCD Review – Should you invest?
Credit Access Grameen is a leading micro finance institution in India. Company is offering high interest rates in this issue. It has a good credit rating of AA-/Stable from IND Ratings.
On the other hand, its business is concentrated only in 3 states which is riskier. Credit ratings can change without any advance intimation to the investors.
High risk investors who understand all these risks can invest in such NCD Bonds.
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Can you post your regular article on best mutual funds to invest in 2023-24?
I usually follow your article before I start investing
It would be published in next few days
There is a serious dilemma – Company giving out 10% interest (monthly rest) with AA ratings but still doubts are there whether to invest or not.
It is their first NCD and looks they want to ensure this is fully subscribed, hence giving high interest rate. Just see what happens in their next NCD.