Indore Municipal Corporation is coming up with secured NCD green bonds now. These green bonds would open for subscription on 10th February, 2023. Indore Municipal Corporation (IMC) is the chief municipal body of Indore city. The NCD interest rates for Indore Municipal Corporation NCD are up to 8.25%. These NCDs are offered for 3 to 9 years tenure. Interest is paid half yearly. There is a major negative part in these NCDs, and I am sure as usual none of the financial websites would cover this. These are NOT regular NCDs. Should you invest in Indore Municipal Corporation NCD issue of February, 2023? What are the negative factors in these NCDs?
About Indore Municipal Corporation Limited
Indore Municipal Corporation (IMC) is the chief municipal body of Indore city. Presently, Shri Pushyamitra Bhargav is the Mayor and Smt. Pratibha Pal, IAS, is the Commissioner (Nagar Aayukt) of the Issuer. IMC is covered under AMRUT Scheme of Government of India.
Indore Municipal Corporation NCD issue – Feb-2023
Here are the issue details.
|Security Type||Secured, Redeemable and Converted NCD Green Bonds|
|Issue Size (Base)||Rs 122 Crores|
|Issue Size (Oversubscription)||Rs 122 Crores|
|Total Issue Size||Rs 244 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||3 to 9 years|
|Interest Payment frequency||Half Yearly|
|Listing on||Within 6 working days on BSE/NSE|
These are allotted on first come first serve basis. Hence, the issue can be closed before this date if it is oversubscribed before the closure date.
What are the credit ratings for these NCDs?
Indore Municipal Corporation NCD rating NCDs are rated as ‘IND AA+/Stable’ by India Ratings and Research Private Limited and “CARE AA; Stable” by CARE Ratings Limited.
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.
What is STRPP in Indore Municipal Corporation NCD?
These are unique NCDs. These NCD’s do not have a maturity date like other NCDs. There is a STRPP concept in these NCDs. STRPP which refers to Seperately Transferable and Redeemable Principal Parts. Each NCD is split into STRPP-A of Rs 250, STRPP-B of Rs 250, STRPP-C of Rs 250 and STRPP-D of Rs 250 totalling to Rs 1,000 overall value per NCD. Each STRPP would have different maturity dates.
STRPP-A – Tenure 3 years – Face value Rs 250
STRPP-B – Tenure 5 years – Face value Rs 250
STRPP-C – Tenure 7 years – Face value Rs 250
STRPP-D – Tenure 9 years – Face value Rs 250
Why to invest in these NCDs?
1) Indore Municipal Corporation NCDs offer attractive interest rates where investors can get interest up to 8.25% per annum and yield works out to be 8.41%.
2) It issues secured NCDs. Its secured NCDs are 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. Hence, it is safe to invest in such secured NCD options.
3) Since these are from Indore Municipal Corporation and IMC part of Amrut Scheme of Govt of India, it carries almost zero risk.
Why not to invest in these NCDs?
1) Indore Municipal Corporation (IMC) has a considerable share of revenue receipts comprises GST compensation. Any delay can adversely impact the liquidity position of the corporation.
2) These green bonds are issued in 4 parts. Though investors invest in a lump sum, they would the maturity amount in bits and pieces in 4 parts.
3) Refer NCD prospectus for complete risk factors.
How to invest in Indore Municipal Corporation NCD Online?
This issue is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. Application forms can be downloaded on the lead manager web site. For more information on this, you can refer prospectus.
How safe is Indore Municipal Corporation NCD?
These NCD green bonds are rated as AA+ by CARE and IND Ratings. Such credit rating carries low credit risk.
Should you invest in Indore Municipal Corporation NCD?
Indore Municipal Corporation NCD of Feb-2023 issue offers high interest rates of 8.25% and yield works out to be 8.42%. These NCDs are rated as AA+ by CARE and IND Ratings. These are safe investment options.
On the other hand, repayment of investment is done in 4 installments. Investors are interested to invest small amounts and get a lump sum, but not that they invest lumpsum and get capital in 4 installments.
Considering these negative factors, investors should rethink before investing in such NCDs. Alternatively, investors can also look at G-Securities which are offering a yield up to 7.3%.
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