12.4% KLM Axiva Finvest NCD August 2019 – Details and Review
KLM Axiva Finvest NCD August 2019 – Details and Review
After 1 year, KLM Axiva Finvest is coming up with Tranche-II NCD Issue that would open for subscription on 28th August, 2019. KLM Axiva Finvest NCD interest rates are up to 12% and yield works out up to 12.4%. They are offering secured NCDs now. KLM Axiva NCDs are offered for 400 days to 75 month period. Your money would get doubled within 75 months. Earlier, I indicated that we have not much heard about this company name in the past, hence it was big question whether to invest in such company NCDs are not. Should you invest in KLM Axiva Finvest NCD August/September, 2019? What are the risk factors one should consider before investing in such high risk NCDs?
Also read: 10 Best SIP Plans for 10 years to invest in India
About KLM Axiva Finvest Limited
They are a non-deposit taking and non – systemically important non-banking finance company primarily serving low and middle income individuals and businesses that have limited or no access to formal banking and finance channels. They operate primarily in four business verticals:
(i) Gold loan business, lending money against the pledge of household jewelry
(ii) Micro, small and medium enterprise loan
(iii) Personal loan and
(iv) microfinance loan to women customers.
As on June 30, 2019, they operate through 125 branches across three states, namely Kerala, Karnataka and Tamil Nadu managed by its corporate office located in Kochi.
Details of KLM Axiva Finvest NCD August 2019 – Tranche II
Issue start date: 28-August-2019
Issue end date: 26-September-2019
NCD’s are available in 10 series/options. It offers NCD for 400 days, 2 years, 3 years, 4 years, 45 months and 75 months tenure.
Coupon interest rates are between 11% to 12%.
Yield comes to 12.4% for these NCDs.
These are Secured Redeemable NCDs.
Interest payable monthly, yearly and on maturity depending on the option chosen by the NCD investor.
The face value of the NCD bond is Rs 1000.
Minimum investment is for the 5 bonds. Means, you need to invest for a minimum of Rs 5,000. Beyond this you can invest in multiples of 1 bond.
These NCD bonds would be listed on BSE. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
The base issue size of Tranche-II is Rs 100 Crores with an option to retain over subscription upto Rs 25 Crores totaling to Rs 125 Crores.
Vivro Financial Services is the lead manager for the issue.
The draft prospectus can be downloaded from BSE Website here and Final Prospectus can be downloaded at this link (at the bottom of the page).
What are KLM Axiva Finvest Interest Rates for August 2019 NCD issue
How the KLM Axiva NCD 2019 issue is allocated to various investors?
There is no specific allocation would be done in this Tranche-II. It would be on a first come, first serve basis.
How are KLM Axiva credit ratings?
The Secured NCDs have been rated by CARE as CARE BB+ Outlook Stable.
The rating of NCDs by CARE indicates that instruments with this rating are considered to have a moderate risk of default regarding timely servicing of financial obligations.
How KLM Axiva Finvest Limited NCDs are secured?
The NCDs would constitute secured obligations of our Company and shall have first ranking pari passu charge with the existing secured creditors, on all movable assets and fixed assets, including book debts and receivables, cash and bank balances, loans and advances, both present and future of the Company equal to the value of one time of the NCDs outstanding plus interest accrued thereon and first ranking pari passu charge on the immovable property situated at Plot No. l0 & plot No. 15. Malligai Nagar, Kombai Village, Uthampalayam Taluk, Theni District, Tamil Nadu.
When KLM Axiva Finvest NCD August / Sept 2019 is proposed to be listed on stock exchanges?
The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 6 Working Days from the date of the Issue Closure.
How is the company doing in terms of profits?
Its standalone profits are as below:
Year ended Mar-2016 – Rs 164 Lakhs
Year ended Mar-2017 – Rs 213 Lakhs
Year ended Mar-2018 – Rs 568 Lakhs
Year ended Mar-2018 – Rs 597 Lakhs
KLM Axiva NCD August / September 2019 – How the returns 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 in their income tax returns and pay income tax based on the individual tax bracket.
Why to invest?
1) The company is earning consistent and improving margins in the last few years. 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 12.4% per annum. You can double your money in 75 months period.
4) It issues Secured NCDs. 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 KLM Axiva Finvest NCD August 2019?
1) Company NPA is high. Its Net NPA is at 4.47% for FY2019.
2) They have received Show-Cause Notice from RBI and any adverse action taken could affect its business and operations.
3) Company, its Promoter and Directors and its Group companies have been subject to search and seizure operations conducted by the Indian income tax authorities.
4) They have limited operating history and evolving business make it difficult to evaluate its business and future operating results on the basis of its past performance, and its future results may not meet or exceed past performance.
5) Its financial performance is particularly vulnerable to interest rate volatility. If they are unable to manage interest rate risk in the future it could have an adverse effect on its net interest margin, thereby adversely affecting the business and financial condition of the company.
6) Its business requires substantial capital, and any disruption in funding sources would have a material adverse effect on its liquidity and financial condition.
7) High levels of customer defaults or delays in repayment of loans could adversely affect its business, financial condition and results of operations.
8) If they are unable to manage the level of NPAs in its Loan Assets, its financial position and results of operations may suffer.
9) One of its Group Company, Payyoli Granites Private Limited had loss after tax for Fiscal 2014-15.
10) Other Internal and external factors can be read at the risk factors of the NCD prospectus.
How to apply these KLM Axiva Finvest NCD August 2019?
KLM Axiva Finvest NCD Issue of August 2019 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. Full form can be downloaded from lead manager website. For more information on this you can refer prospectus.
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Should you invest in KLM Axiva Finvest NCD of 2019?
KLM Axiva Finvest is offering Secured NCDs of Tranche-II issue that offers high interest rates up to 12% and yield up to 12.4%. Banks are reducing the interest rates month on month and the interest rates are between 6% to 8% per annum. Such interest rates are low compared to interest rates offered by these NCDs.
However, low credit rating of these NCDs is considered as HIGH RISK. Due to lower credit rating, such companies would find it difficult to get funding and would offer the highest interest rates to the general public for such NCDs. In future, there are greater chances that such companies default in payment of interest or repayment of capital itself. Currently we already see NBFC crisis. Considering all these factors, investors should stay away from such HIGH RISK NCDs as of now.
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KLM Axiva Finvest NCD August 2019 – Details and Review
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A secured NCD is backed by the issuing company’s assets. This means that the company has to fulfil its debt obligation whatsoever. This makes secured NCDs safer since they have a lower default risk. Considering this is secured NCD, investor can go for 400 days tenure which is still giving 11% returns. Please provide your views.
Hello Deepak, Secured NCDs means these are secured. However, you are seeing the DHFL crisis now. They are not able to pay interest to such secured NCDs. We don’t know when these secured NCD investors would get paid for interest (forget about principal). You might get money, but there is risk as you don’t know when you would get it in such crisis.