9.85% ECL Finance NCD Issue July 2018 – Should you subscribe?

ECL Finance NCD Issue July 2018 ReviewECL Finance NCD Issue July 2018 – Should you subscribe?

ECL Finance NCD July 2018 Tranche-I Public Issue would open for subscription on 24th July, 2018. ECL Finance NCD offers yield up to 9.85% interest rates. These are Secured NCDs. ECL Finance is one of the leading systemically important non-deposit taking NBFCs. When interest rates are low, high interest rate NCDs from ECL Finance NCD would definitely attract investors who want to invest in the short term to medium term. Should you invest in ECL Finance NCD Issue July 2018? What are the risk factors one should consider before investing in such NCDs?

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About ECL Finance Limited

They are one of the leading systemically important non-deposit taking NBFCs, focused on offering a broad suite of secured corporate loan products, retail loan products which are customized to suit the needs of the corporates, SMEs and individuals. Its retail loan products include:

1) Structured Collateralised Credit: Its structured collateralised credit loans constituted 25.15% of its total loan book as at March 31, 2018. Structured collateralised credit loans are offered mostly to corporates against collateral such as liquid market securities, pledge of other securities, pledge of shares by promoters, immovable property, etc. The loans include bridge financing or other short term loans to corporates. The funds raised are utilized for the working capital requirement of the corporates, expansion and diversification of business among other uses. The tenure of the loans is generally up to two years.

2) Wholesale Mortgages: This includes various structured financing solutions for finance to developers for real estate projects under construction, which constituted 35.46 % of the Company’s total loan book as at March 31, 2018.

3) SMEs and others: This includes credit facilities and short term loans to SMEs for meeting their business requirements, which constituted 7.70 % of the Company’s total loan book as at March 31, 2018.

4) Loans against securities: This includes loans to investors against their existing portfolio of investments, which constituted 21.00 % of the Company’s total loan book as at March 31, 2018.

5) Retail Mortgages – Loans against Property: This includes loans offered to self-employed individuals for business purposes against a mortgage of residential or commercial property, which constituted 6.67 % of the Company’s total loan book as March 31, 2018.

6) Agri Credit: As a part of agricultural value chain services, we extend short term finance (usually for a period of three to nine months) against agri commodities inventory stored in warehouses managed by the sister concerns of the Company, which constituted 4.02 % of the Company’s total loan book as at March 31, 2018.

Features of ECL Finance NCD Issue July 2018 – Tranche-I

The NCD issue start date is 24th July, 2018.

NCD Issue closes on 16th August, 2018. However, these are first come, first serve basis.

NCD’s are available in 8 options. It offers NCD for 3 years, 5 years and 10 year tenure.

These are secured NCDs.

Interest payable every month or every year or on maturity depending on the option chosen by the 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/NSE. Hence, these are liquid investments.

NRI’s cannot apply to this NCD subscription.

RHP Prospectus can be downloaded this link.

Interest rates of ECL Finance NCD Issue July 2018

ECL Finance NCD Issue July 2018 Interest Rates

What is Floating Interest Rate in this NCD offered for 3 years Tenure?

The company is offering Series VIII NCDs which carries a floating interest rate based on benchmark MIBOR rates plus applicable spread to various Categories of Investors. The specified spread shall be 2.5% p.a. for all Category of Investors. While the spread will be fixed throughout the tenor of the Series VIII NCDs, since the floating interest rate on such NCDs is total of Reference Benchmark MIBOR on an annualized basis plus the fixed spread of 2.5%, floating interest rate will change according to change in Reference Benchmark MIBOR.

Let me explain to you with a simple formula.

Interest is paid for these NCDs = Benchmark MIBOR + Spread of 2.5%.

The current MIBOR rate is around 6.65% (July, 2018). Means the interest rate would be around 9.15%  (6.65% + 2.5%) which would change during the tenure of the NCD.

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When ECL Finance NCD of July 2018 is proposed to be listed on stock exchanges?

The NCDs are proposed to be listed on BSE and NSE. The NCDs shall be listed within 12 Working Days from the date of NCD issue.

What is the credit rating of these NCDs?

1) These NCDs have been rated by CRISIL as ‘CRISIL AA/Stable’ which indicates Stable outlook.

2) These NCDs have been rated by ICRA as ‘ICRA AA (stable) which indicates as Stable outlook.

How is the company doing in terms of profits?

Its profits are as below:

Year ended Mar-2016 – Rs 155 Crores

Year ended Mar-2017 – Rs 129 Crores

Year ended Mar-2018 – Rs 142 Crores

Why to invest?

1) These NCDs offer attractive interest rates where you can get yield up to 9.85% per annum.

2) This is secured NCD issue. In case of any non performance of the company and the company gets closed 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.

Why not to invest in ECL Finance NCD Issue July 2018?

1) High levels of customer defaults and the resultant non-performing assets could adversely affect company’s business, financial condition, results of operations and future financial performance.

2) The company may be impacted by volatility in interest rates, which could cause its Gross Spreads to decline, and consequently, affect its profitability.

3) Company top 20 borrowers have an exposure of 24.16% of company total exposure as on March 31, 2018. Company’s inability to maintain relationships with such customers or any default and non-payment in future or credit losses of company single borrower or group exposure where they have a substantial exposure could materially and adversely affect company business, future financial performance and results of operations.

4) The company is subject to supervision and regulation by the RBI, as an NBFC-ND-SI, and other regulatory authorities and changes in the RBI’s regulations and other regulations, and the regulation governing company or the industry in which company operates could adversely affect its business.

5) Company’s inability to comply with observations made by the RBI or any adverse action by the RBI may have a material adverse effect on its business, financial condition and results of operations.

6) Company’s inability to obtain, renew or maintain the statutory and regulatory permits and approvals which are required to operate its existing or future businesses may have a material adverse effect on its business, financial condition and results of operations.

7) The company may not be able to recover the full value of collateral or amounts which are sufficient to cover the outstanding amounts due under defaulted loans on a timely basis or at all and as a result, which could adversely affect its financial condition and results of operations.

8) They and certain of company Directors are involved in certain legal and other proceedings and there can be no assurance that they and company Directors will be successful in any of these legal actions. In the event they are unsuccessful in litigating any of the disputes, company business and results of operations may be adversely affected.

9) A decline in the company’s capital adequacy ratio could restrict its future business growth.

10) Other Internal and external factors can be read at the risk factors of the NCD prospectus.

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How to apply these ECL Finance NCD Issue July 2018?

ECL Finance NCD Issue of July/August Tranche-I of 2018 is available in demat form only. You can apply online at any of the broker website where you are maintaining a demat account. For more information on  this you can refer 1st page of the prospectus.

Conclusion: These ECL Finance Limited NCD’s are secured in nature. Though it carries some element of risk, they are secured. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. Considering high interest rates and secured NCD’s in nature, one can consider investing in these NCD’s after assessing risk factors indicated above.  

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ECL Finance NCD Issue July 2018 – Should you subscribe

Suresh KP


  1. Thank you for explaining the entire case.
    Can you pls confirm whether the cumulative return at the end of 3 yrs or 5 yrs will be tax free or taxable?

  2. Sir
    How this income of interest of NCd are taxed in different slabs and further what will be effective interest rates after tax

    Pls explain

    Thanks Sir

  3. Sir how the interest rates on the NCd are taxed and what will be the actual interest rate after taxation in different slabs
    Pls explain

    1. It would depend on your income tax slab. You can reduce %of income tax which you are paying from these returns. e.g. If you are in 20% tax bracket, reduce 20% of interest income which you need to declare and pay income tax.

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