IIFL NCD Secured Bonds-Sep-2013-Yield up to 12.68%-Should we invest?
Stock markets are going up. Secured NCD's and tax freebonds are in the market now. Investors have several choices to invest. To add this, India Infoline Finance Ltd is coming up with Non-Convertible Debenture (NCD) Secured Bonds. The interest rates are as high as 12.68% per annum and it is available in 3 years and 5 years tenure. Can we invest in IIFL NCD Secured Bonds? What are its features and the risks involved in IIFL Bonds?
India Infoline Finance Ltd is subsidiary of India Infoline Ltd which is largest diversified financing company. IIFL is NBFC Company focusing on mortgage loans, commercial vehicle finance, gold loans, capital market finance and health care finance.
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Features of IIFL NCD Secured Bonds
- Issue start date: 17-Sep-2013
- Issue end date: 4-Oct-2013
- Secured Bonds are available in 4 different options. Option 1 and 2 are for 36 months tenure (Monthly and Annual interest payment options). Option 3 and 4 are 60 months tenure where interest is paid monthly and annually. This is not that complicated like Muthoot Finance where they issued 10 different options and confused the investors.
- Interest is payable monthly or annually.
- Face value of the NCD secured bond is Rs 1,000.
- Minimum investment is for 5 bonds means, you need to invest for minimum of Rs 5,000. Beyond this you can invest in multiples of 1 bond.
- These NCD bonds would be listed in stock exchanges. Hence these are liquid investments.
- Non-Resident Indians (NRI’s) can invest in these NCD’s.
- The issue size is Rs 525 Crores with an option to retain oversubscription to Rs 525 Crores aggregating to Rs 1,050 Crores.
- Draft Prospectus: http://www.iiflfinance.com/Portals/0/IIISL_Solution/pdf/IndiaInfolineFinanceLtd-Prospectus_2013.pdf
Below are the Interest rates details.
How company is doing in terms of financials?
- Revenues of the company has grown from Rs 9,109.7 Mn (FY 2011-12) to Rs 16,939.82 Mn (FY 2012-13) indicating a growth of 85%.
- Profits increased from Rs 892.02 Mn (FY 2011-12) to Rs 1004.39 Mn (FY 2012-13) indicating a profit growth of 72%.
- Non Performing Assets (NPA) of the company is 0.56% (FY2011-12) Vs 0.49% (FY 2012-13).
Why to invest?
- Attractive interest rate of 12% per annum and yield on monthly interest would work out to be 12.68% per annum.
- The NCDs proposed under this Issue have been rated ‘CARE AA’[Double A] by CARE and ‘BWR AA (Outlook:Stable)' by Brickwork. The rating indicates instruments are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
- Company is doing well in terms of revenues and profits.
- It offers secured NCD’s where your money is safe. Means in case of any unforeseen thing happening to company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
- Low NPA indicates low risk on debts.
Why not to invest?
- As of June 30, 2013 and March 31, 2013 IIFL capital adequacy ratio computed on the basis of applicable RBI requirement was 21.10 % and 21.60% as compared to a minimum of capital adequacy requirement of 15% stipulated by RBI for FY13.
- Due to change in interest rates charged to customers (not to investors) the profits may decline.
How to apply?
You can apply directly from your stock broker where you are maintaining demat account. You can also apply directly by preparing a cheque with necessary documents and send it to IIFL office directly. You can refer to page no. 282 of prospectus on the process of applying manually.
SREI NCD Vs Muthoot Finance NCD’s Vs IIFL NCD Secure bonds
Currently SREI secured NCD and Muthoot Finance NCD’s are also running. All of them would be allotted on first-come-first serve basis. Here is a quick comparison.
Interest rates: SREI secured NCD offers 11.50% interest whereas Muthoot is offering 12.55% interest rates. IIFL offers 12% interest rate. If you opt for monthly payment of interest you would get 12.68% per annum.
Security: SREI NCD is secured. Muthoot Finance NCD is offering Secured NCD and un-secured NCD. Unsecured NCD’s does not provide any security and investors should be little cautious about this. IIFL offers secured NCD Bonds.
TDS: All these companies are not deducting TDS if you apply in demat form.
Also read: How much gold should be part of your portfolio?
REC Tax free bonds Vs IIFL NCD Secured bonds
Let us go one more step ahead and check current REC tax free bonds comparison with NCD Secured bonds. Both are secured. However post tax the returns would be lower for IIFL NCD Secure Bond. If you are in highest tax bracket of 30%, it is wise to invest in REC tax free bonds where the yield would be 8.7% whereas IIFL Secured Bond yield would be 8.4% only (post tax).
Conclusion: Under stock market volatility where investors are thinking where to invest, secured NCD issue would definitely benefit investors. Investors can subscribe to IIFL NCD secured bonds which offers highest safety and high interest rates. High tax bracket individuals can opt for REC bonds rather than IIFL Secured bonds.
What is your opinion in NCD Bonds? Have you invested in any bonds earlier? What is your experience?
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IIFL NCD Secured Bonds-Sep-2013-Yield up to 12.68%
As per prospectus of IIFL, they want to invest in bank deposits and repay the loans.How they can pay the investor from earnings of bank deposits as their interest is low.
Hi DV Sobti, There is no indication anywhere that they would invest this amount in Bank Deposits. The prospectus clearly specify that such procees would be used for lending money and investing in growth or repayment of existing loans. Pls quote reference or page no so that I can check.
I found the informaton precise and am happy to visit your webpages in future.
Thank you Gilson. Please let me know in case I can help you in any financial advice.
I am new to this type of invesment. I am planning to invest rs 30000. I just want to know wheather should I invest the whole amount to buy a single IIFL bond or can I split the money to buy more bonds. Also, please tell me how the intrest would be calculated.
Hi Kumar, suggest you invest in 2 options like IIFL and any other bonds which you feel it would fit. If you are high tax bracket, invest in HUDCO tax free bonds which are open today
Hey Can i invesment in iifl bonds without demat account. and get submit a 15g form?
is it possible or not.
Pankaj, Form15G/15H can only be submitted in banks. For IIFL bonds, if you do not take thru demat account, TDS would be deducted beyond Rs 5,000 interest.