8.65% L&T Finance NCD Dec 2019 – Tranche-I – Review

L&T Finance NCD Dec 2019 Issue Details and ReviewL&T Finance NCD Dec 2019 – Tranche-I Review

L&T Finance is coming up with Tranche-I NCDs that would open for subscription on 16th December, 2019. It is issuing secured NCD’s now. The yield is as high as 8.65% per annum. It offers NCDs for 36 months, 60 months and 84 months tenure. Currently banks are offering low interest rates between 5% to 8% and these NCDs would definitely attract investors. The recent NBFC crisis has created havoc where investors are not getting their NCD interest, there is a delay in repayment of NCD bonds and in some cases there is default on repayment of commercial papers where mutual fund invested. Should you still invest in  L&T Finance NCD of December 2019 Tranche-I during this NBFC crisis?

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About  L&T Finance Limited

They are one of the leading non-banking financial services companies in India in terms of total loans outstanding, as of September 30, 2019. The company is a part of the larger L&T group which is one of the leading business conglomerates in India, with a presence across infrastructure, power, heavy engineering, electrical and automation, hydrocarbons, IT and technology services, financial services, project development, metallurgical and material handling, realty, shipbuilding, construction equipment, machinery and industrial products sectors.

L&T Finance December 2019 NCD Issue details

L&T Finance is issuing secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 500 Crores with an option to retain another Rs 1,000 Crores over subscription totaling to Rs 1,500 Crores. It comes with 6 different options, which contains 24 months, 60 months and 84 months tenure NCDs.

About L&T Finance December 2019 Secured NCDs

They are offering secured NCD’s now in December 2019. The NCDs would constitute secured and senior obligations of the Company and shall be first ranking pari passu with the existing secured creditors on all loans and advances/ book debts/ receivables, both present and future of Company equal to the value one time of the debentures outstanding plus interest accrued thereon, and subject to any obligations under applicable statutory and/or regulatory requirements.

Issue Details of L&T Finance NCD of December 2019 – Tranche-1

NCD Issue start date: 16-December-2019

NCD Issue closes on: 30-December-2019

These would get closed on first come first serve basis and need not wait till last date of closure.

NCD’s are available in 6 different options.

The interest on these NCDs are payable monthly, yearly and at maturity depending on the NCD option chosen.

The face value of the NCD bond is Rs 1,000.

Minimum investment is for 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. Hence, these are liquid investments.

Non-resident Indians (NRI’s) cannot invest in these NCD’s.

CARE, Crisil and Ind Rating have rated these NCDs as AAA/Stable which indicate that instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.

Edelweiss Financial Services, AK Capital Services and Trust Investment advisors are the lead managers for this issue.

You can download Prospectus of L&T Finance December 2019 NCD issue details here.

Here are the interest rates.

L&T Finance NCD Dec 2019 - Interest and Yield Chart

What is the issue break-up?

Here is the issue break-up:

1) QIB – 10%

2) NII – 10%

3) HNI – 35%

4) Retail Investors – 45%

How is the company doing in terms of Financials?

Here are the financials of the company.

1) Its consolidated revenues have increased from Rs 5,071 Crores in FY2018 to Rs 7,382 Crores in FY2019.

2) Its profits increased from Rs 156 Crores in FY2018 to Rs 883 Crores in FY2019.

3) Gross NPA is at 6.07% for the year FY2019 Vs 6.51% for FY2018. Net NPA is at Rs 2.81% for FY2018 (as per Indian Gaap).

Why to invest?

1) This is a Leading NBFC company in India and part of L&T group which has strong fundamentals.

2) Attractive NCD interest rates where one can get 8.65% yield.

3) It is issuing secured NCDs which are safe to invest compared to other unsecured NCDs.

4) It has good credit rating of AAA/Stable from CRISIL, Care and Ind Ratings.

Why not to invest in L&T Finance December 2019 NCD?

1) Any disruption in its sources of funding or increase in costs of funding could adversely affect its liquidity and financial condition.

2) They operate in a highly competitive industry and its inability to compete effectively may adversely affect its business.

3) They are affected by volatility in interest rates for both its lending and borrowings, which could cause its net interest income to decline and adversely affect its results of operations and profitability.

4) The risk of non-payment or default by borrowers may adversely affect its financial condition and results of operations.

5) Any adverse developments in the industries in which they operate, may adversely affect its business and results of operations.

6) They have significant exposure to certain sectors. Any negative trends in these sectors may affect the ability of its borrowers to perform their obligations under their existing financing agreements with us and increase the level of Gross Stage 3 assets in its portfolio, adversely affecting its business, financial performance and results of operations.

7) Certain of the loans provided by us are unsecured and are susceptible to certain operational and credit risks which may result in increased levels of Gross Stage 3 and may adversely affect its business, prospects, results of operations and financial condition.

8) You can refer all risk factors in the final NCD prospectus of the company.

How to apply these NCDs?

You can apply these NCDs in demat form only. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. The process of applying NCD would be through ASBA you can reach out to any of the lead managers websites to know more details on how to apply them.

How returns from L&T Finance December 2019 NCD are 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.

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When this L&T Finance NCD of 2019 would get listed on BSE?

These NCDs would get listed after 6 working days from the date of closure.

Should you invest in L&T Finance NCD of December 2019?

Currently NBFC Crisis is at PEAK. There are many investors who are writing mails to me saying how to deal in DHFL issue now, where they earlier invested in NCDs and FDs earlier and they are not getting their money. L&T Finance NCDs are high credit rated by Crisil, CARE and Ind Ratings. However, these ratings can change any time. If you are a high risk investor, you can invest in high credit rating secured NCDs like L&T Finance. Otherwise, stay away from NCDs as of now.

Readers, do you feel these NCDs are worth investing?

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Suresh KP

L&T Finance NCD December 2019 Issue Review

Suresh KP

One comment

  1. I think one should better invest in L&T finance stock rather than its NCDs.
    But very nice educative post on NCDs. thanks for the same.

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