Mahindra Finance July 2017 NCD – Should you invest?
Mahindra Finance NCD for July-2017 (Mahindra and Mahindra Financial Services Ltd NCD) Tranche-I would open for subscription on 10th July, 2017. It is issuing un-secured NCD’s for the second time. The yield is high as 8% per annum. Mahindra Finance has good credit rating from BWR and IND Ratings. Currently NCD’s are having very high demand as these are offering high interest rates. Muthoot Finance NCDs offered 9% yield last month and it got subscribed in 1 day. Should you invest in Mahindra Finance Unsecured NCD of July 2017? What are the hidden factors an investor should consider before investing Mahindra Finance NCD of 2017? In this article, I would provide some interest insights about Mahindra and Mahindra Financial Services Ltd NCD.
Also Read: Top Performing Gilt Mutual Funds that gave 9% to 16% annualised returns – Should you invest?
About Mahindra & Mahindra (M&M) Financial Services Limited
Mahindra & Mahindra Financial Services Limited is one of the leading non-banking finance companies (NBFC) with customers primarily in the rural and semi-urban markets of India. The Company is a part of the Mahindra group, which is one of the largest business groups in India. It is primarily engaged in providing financing for new and pre-owned auto and utility vehicles, tractors, cars and commercial vehicles. It also provides housing finance, personal loans, financing to small and medium enterprises, insurance broking and mutual fund distribution services. In addition the company, among other services, provide wholesale inventory financing to dealers and retail-financing to customers in the United States for purchase of Mahindra group products through Mahindra Finance USA LLC, its joint venture with a subsidiary of the Rabobank group.
Mahindra Finance July 2017 NCD
Mahindra Finance is issuing un-secured, sub-ordinated, redeemable Non Convertible Debentures (NCD’s) to the tune of ₹ 250 Crores with an option to retain another ₹ 1,750 Crores over subscription totaling to ₹ 2,000 Crores. It comes with 3 different options, which contains 7 years, 10 years and 15 years tenure.
About Mahindra Finance July 2017 Unsecured NCD
Mahindra finance is offering unsecured NCD’s now in July, 2017. For un-secured NCD the assets are NOT backed up for principal and interest. In case something happens to company performance and company is closed, investors would be given normal preference in repayment of capital and interest.
Features of Mahindra Finance NCD of July-2017
- Issue start date: 10-July-2017
- Issue end date: 28-July-2017
- NCD’s are available in 3 different options.
- Interest of these NCDs are payable once in a year.
- The face value of the NCD bond is ₹ 1,000.
- Minimum investment is for 10 bonds means, you need to invest for a minimum of ₹ 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.
- BWR AAA and IND AAA rated as Outlook Stable, which indicate that instruments with this rating are considered to have highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.
- Out of the total issue, 70% is reserved for retail and 30% to HNI investors (above ₹ 10 Lakhs of investment).
- There is call option available for 15 years NCD which is 10 years. Means company can close these 15 years tenure NCD in 10 years by paying the money back to investors. Call option not available for 7 years and 10 years tenure NCDs.
- Edelweiss Capital, Axis Bank, AK Capital Services, Trust Investment Advisors and YES Securities are the lead managers to this issue.
- You can download Mahindra Finance NCD Tranche-I 2017 Prospectus here.
Here are the interest rates on the July-2017 NCD’s of Mahindra Finance
How is the company doing in terms of Financials?
1) Revenues of the company have increased from ₹ 5,905 Crores (FY 2015-16) to ₹ 6,237 Crores (FY 2016-17) indicating a growth of 6%.
2) Profits after taxes (PAT) have reduced from ₹ 672 Crores (FY 2015-16) to ₹ 400 Crores (FY 2016-17) indicating a negative growth of 40%.
Why to invest?
1) This is a Leading NBFC company in India.
2) Attractive interest rates where one can get 8% yield.
3) Good credit rating of the company.
Why not to invest in Mahindra Finance July 2017 NCD?
1) These are Unsecured NCD’s. Means something happens to company performance and it gets wind-up, investors would be given less preference in repayment.
2) Profits are shrinking. It has seen 40% negative growth in last financial year. Reduction in profits can lead to delay in interest payment.
How to apply these NCDs?
If you have demat account, you can apply through your demat broker online. These can be easily sold at later point of time if you can take them in demat form, however you can sell at market price only. You can also apply in physical form by visiting the company website and downloading the application form and preparing the cheque and submitting at collection centres.
How Mahindra Finance July 2017 NCD are taxed?
If you apply through demat form, there would not be any TDS on the interest of these NCD’s. However, if you applied through physical form, any interest above ₹ 5,000 would attract tax and company would deduct TDS as per applicable rate. It is immaterial whether company would deduct TDS or not, one has to declare the interest in their income tax returns and pay income tax based on the individual tax bracket.
Also if you sell these bonds on BSE at higher rate, capital gains tax would apply.
When this Mahindra Finance NCD of 2017 would get listed on BSE?
These Mahindra finance NCDs of July, 2017 would get listed after 12 working days from the date of closure. Means it would get listed approx. on 17th August, 2017.
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Should you invest in Mahindra Finance NCD of July 2017?
Refer my earlier articles about NCD’s and you would get the answer. You should ask these 4 questions before you want to invest in these NCDs.
1) Mahindra Finance NCDs are unsecured. Investing in unsecured NCD’s would be high risk as they are not backed up with any assets of the company and in case of wind-up of company due to performance issue, investors would get least preference in repayment of these NCDs. Do you want to invest in such NCD’s then?
2) These NCD’s are for 7, 10 and 15 years. Do you want to park your money in unsecured NCD for such long term? Parking money in high risk options for longer time is not advisable as no one can predict what happens to companies in long term. One should always look for short term to medium term investment options.
3) Mahindra Finance NCD offers 8% interest per annum. There are several banks which still offer 7.5% to 8% on their fixed deposits. Should you invest in Mahindra Finance bonds then?
4) Mahindra finance company profits are going down. In future there could be delay in payment of interest if profits are in declining mode. Are you okay with this?
Conclusion: Considering all these limiting factors, I would ask investors to stay away from such high risk unsecured NCD’s.
Readers, do you feel these NCDs are worth investing?
If you enjoyed this article, share it with your friends and colleagues through Face book and Twitter.
Suresh
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Good analysis. Better to put in new small banks like ESAF. Are they safe though?
It was a good analysis considering all those factors. You are right we should not go for it and thus I made my decision to not go for this. Thank You, Man! 🙂
Hey Thanks for a detailed analysis.
It helped.
Thank you, good decision.
Thanks Venghat. Pls share this on your FB or twitter as this might be useful for your friends too
It's really a nice article. It is very very useful for small investors like us.
Good review. Thanks!
Thanks. Very nice information and advice.
Dear sir,
rbi 8 taxable bonds is good option for investment or not?if campare to this ncd
please suggust?
Dear Suresh
I am NRI living in middle east and am sending every month nearly 80k to my mother (65 years ) senior citizen and she has making investments in mutual funds in sip of different funds in long terms basis and made me as nominee
she has no source of income other than mineswnding from here
hacing own home and small returns getting from he same building ( two floors building )
my questions is how to make income tax ?
all our investments through banks and in her name only with nominee of mine
kindly advice me how to file the income tax return and so far we have not filed any returns
Regards
venugopalan
Pls share few info like what is her total income last year? Is it crossed Rs 2.5 Lakhs basic limit?. If she has PAN card, based on income she need to pay tax and file ITR
Thanks for your reply.
She is having Pancard and aadharcard too
she has no income from any source. Only rent she is getting cash @7000/- per month. Nothing through bank dealings.
Only the source of income in the bank which am transferring to her and few interests and dividends in her direct bank accounts crediting
which was not more than 1 lakh of the whole year.
Now how to make income tax nill return.
Regards
venugopalan
Hi Venu, Since you are transferring money to your mother every month this would be treated as gift given to relative (as per relative definition as per IT act), hence no gift tax or any other tax payable by your mother on this transaction. Now she is earning Rs 1 Lakh interest per annum, hence she is not liable for any income tax. You have not indicated that she is having PAN card or not. I am assuming she has PAN card. 1) Pls file income tax returns considering whatever interest amount is received and if any tax is payable 2) Ensure you indicate Rs 80K x 12 months as Gift amount (you need to show this as exempted income in ITR) in your ITR. This way you are ensuring that the amount you transferred is not liable for tax. However you should note that any earnings / returns from such investments in mutual fund SIPs would be taxed as per short term or long term capital gains (based on MF taxation guidelines)