10.45% Edelweiss Financial Services NCD Bonds issue – Oct-2023

Edelweiss Financial Services is launching NCD issue that would open for subscription on 6th October, 2023. Edelweiss Financial Services is a leading investment banking company which has diversified businesses across retail, corporate credit, wealth management, etc. NCD interest rates are up to 10.45%. These NCDs are offered for the tenure of 24 months, 36 months, 60 months and 120 months. Interest on these NCDs is paid either monthly, annually or on maturity depending on the option chosen by an investor. Should you invest in Edelweiss Financial Services NCD’s of October, 2023 issue? What are the risk factors one should consider before investing in such high risk NCDs?

About Edelweiss Financial Services Limited

This investment banking company, through its subsidiaries has diversified its businesses to include credit, including retail and corporate credit, wealth management, asset management, asset reconstruction and insurance including life and general insurance businesses, which are conducted through its subsidiaries.

Edelweiss Financial Services NCD – Oct-2023 – Issue Details

Here are the NCD issue details.

Subscription opening Date 06-Oct-23
Subscription closure Date 19-Oct-23
Issuing Security Name Edelweiss Financial Services Limited
Security Type Secured, Redeemable, Non-Convertible Debentures
Issue Size (Base) Rs 100 Crores
Issue Size (Option to retain over subscription) Rs 100 Crores
Total issue size Rs 200 Crores
Issue price Rs 1,000 per bond
Face value Rs 1,000 per bond
Series I to X
Minimum Lot size 10 bonds and 1 bond there after
Tenure 24, 36, 60 and 120 months
Interest Payment frequency Monthly, Annuallly and Cumulative
Listing on Within 6 working days on BSE/NSE
Lead Manager Trust Investment Advisors Private Limited and Nuvama Wealth Management Limited
Debenture Trustee/s Beacon Trusteeship Limited

Interest Rates of Edelweiss Financial Services NCD Oct-2023

Frequency of Interest Payment Annual NA Monthly Annual NA Monthly Annual NA Monthly Annual
Tenure (months) 24 24 36 36 36 60 60 60 120 120
Coupon (% per Annum) 8.95% NA 9.20% 9.60% NA 9.67% 10.10% NA 10.00% 10.45%
Effective Yield (% per Annum) 8.94% 8.95% 9.59% 9.59% 9.60% 10.10% 10.09% 10.10% 10.46% 10.44%
Amount on Maturity (In Rs.) 1,000 1,187 1,000 1,000 1,317 1,000 1,000 1,618 1,000 1,000

Why to invest in Edelweiss Financial Services NCD?

Let us review the positive factors in this NCD issue.

  • This NCD offers attractive interest rates where investors can get interest up to 10.45% per annum.
  • It issues secured NCDs. Secured NCDs are always safe compared to unsecured NCDs. In case a company gets wind-up/shut down for some reason, secured NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company.
  • These NCDs are rated as CRISIL AA-/Negative. NCD instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

Why not to invest in Edelweiss Financial Services NCD?

Let us review some of the negative factors or risk factors in this NCD issue.

  • Company consolidated revenues have fallen in FY2022 compared to previous years. However, for FY23 we could see a good improvement. You will not see such info in RHP of the NCD.
  • Company share price appreciated by just 3.5% in the last 3 years and yet to gain investor confidence.
  • High levels of customer defaults and the resultant non-performing assets could adversely affect its business, financial condition, results of operations and future financial performance.
  • Refer Edelweiss Financial Services Oct-23 NCD prospectus for complete risk factors.

Edelweiss Financial Services NCD Bonds – Oct-2023 Issue – Should you invest?

  • These NCD’s offer high interest rates. Though banks have increased the FD interest rates these days, they are still low compared to the interest rates offered in these NCDs. These NCDs are rated as CRISIL AA-/Negative by CRISIL Ratings. Also, secured NCD bonds are relatively safer compared to unsecured bonds while risk is not 100% eliminated.
  • On the other hand, credit ratings may change in future. In the last 5 years, company revenues have fallen and margins are shrinking, however, started regaining now from FY23. One should not forget about some of the NBFC companies defaulted NCD payments or some NBFCs delaying NCD re-payments in the last few years.

High risk investors who understand all these risk factors can invest in these NCDs. However, investors can avoid long term NCD bonds of 120 months and opt for short to medium tenure bonds as we do not know how such companies would turn in the long term.

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Suresh KP

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