National Highways Infra Trust is coming up with secured NCD bonds now. These bonds would open for subscription on 17th Oct, 2022. Company is a registered infrastructure investment trust under the InvIT Regulations. The NCD interest rates for National Highways Infra Trust NCD are up to 7.9% and yield 8.05%. These NCDs are offered for 13 years to 25 years tenure. Interest is paid semiannually. There is major negative part in these NCDs and none of the financial websites are covering this. These are NOT regular NCDs. Should you invest in National Highways Infra Trust NCD issue of Oct, 2022? What are the negative factors in these NCDs?
Also Read: Should you invest in TNPFC FD offering 10.46% Yield?
About National Highways Infra Trust Limited
Company is a registered infrastructure investment trust under the InvIT Regulations.
It currently have a right to toll, operate and maintain a portfolio of five Initial Toll Roads in the Indian states of Gujarat, Rajasthan, Telangana and Karnataka, and intend to toll, operate and maintain a portfolio of three Target Toll Roads in the Indian states of, Telangana, Maharashtra, Uttar Pradesh and Madhya Pradesh under the Toll Operate Transfer model conceived by NHAI. These Toll Roads are operated and maintained pursuant to concessions granted by the NHAI. The Initial Toll Roads comprise five stretches spanning a total length of approximately 389 kms and the Target Toll Roads comprise three stretches spanning a total length of approximately 246 kms.
National Highways Infra Trust NCD issue – Oct-2022
Here are the issue details.
|Security Type||Secured, Redeemable and Converted NCDs|
|Issue Size (Base)||Rs 750 Crores|
|Issue Size (Oversubscription)||Rs 750 Crores|
|Total Issue Size||Rs 1,500 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||13 to 25 years|
|Interest Payment frequency||Semi-Annually|
|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?
National Highways Infra Trust NCD rating NCDs are rated ‘CARE AAA;Stable’ by CARE Ratings Limited and ‘IND AAA/Stable’ by India Ratings and Research Private 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 National Highway Infra Trust NCD?
There is major negative part in these NCDs and none of the financial websites are covering this. These are NOT regular NCDs.
Do you know that these NCD’s do not have maturity amount? There is a STRPP concept in these NCDs. STRPP which refers to Separately Transferable and Redeemable Principal Parts. Each NCD is split into STRPP-A of Rs 300, STRPP-B of Rs 300 and STRPP-C of Rs 400 totaling to Rs 1,000 overall value per NCD. Each STRPP would have different maturity dates.
STRPP-A – Tenure 13 years – Face value Rs 300
STRPP-B – Tenure 18 years – Face value Rs 300
STRPP-C – Tenure 25 years – Face value Rs 400
The maturity amount of each STRPP is paid in small parts and it would become zero as on the date of maturity. As an example for STRPP-A of the face value of Rs 300, the maturity amount would be paid in smaller pieces of Rs 50 each from the 8th year to 13th year (6 parts of Rs 50 each). On 13th year, the maturity amount of STRPP-A would be zero.
Let us look how maturity amount is paid for an NCD of Rs 1,000.
Why to invest in these NCDs?
1) National Highways Infra Trust NCDs offer attractive interest rates where investors can get interest up to 7.9% per annum and yield works out to be 8.05%.
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.
Why not to invest in these NCDs?
1) This trust is formed just 2 years back and have only limited operational history.
2) Though this trust is sponsored by NHAI, it was communicated that these NCDs are not guaranteed by Govt of India.
3) Though you would invest your money in one go and you would get interest semi-annually, the maturity amount is paid in bits and pieces of Rs 50 per bond each.
4) Refer NCD prospectus for complete risk factors.
How to invest in National Highways Infra Trust 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 National Highways Infra Trust NCD?
These NCD bonds are rated as AAA by CARE and Ind Ratings. Such credit rating carries low credit risk. However Govt of India has indicated that these are not guaranteed by them.
Also Read: High Return Mutual Funds to invest in 2022
Should you invest in National Highways Infra Trust NCD?
National Highways Infra Trust NCD of Oct-2022 issue offers high interest rates of 7.9%. These NCDs are rated as AAA by CARE and Ind Ratings.
On the other hand, this trust has limited operating history, credit ratings can change at any time and bonds are not guaranteed by Govt of India. Repayment of maturity amount in bits and pieces is one of the major negative factor. Investors are interested to invest small amounts and get a lump sum, but not that they invest lumpsum and gets bits and pieces of capital over 8 to 25 years.
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 7.5%.
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Could you please update if this bond is eligible for 80CCF tax deduction?
Thank you much for sharing the insights on maturity credits.
As summarized by you, there are some strong negatives of this Issue:
1. Since this issue or rather the Trust is not guaranteed by GoI, therefore, it is vulnerable to ratings change and looking at a really very long tenure of 25 years, ratings change can bring disaster to the depositors/buyers of this issue.
2. Repayment maturity is really very long and that too in bits and pieces. As rightly pointed out, an investor who buys an NCD/Bond, looks for a steady stream of income and a lump sum maturity amount or staggered over a period of may be 2-3 years. By applying for this issue, one actually fritters away the hard earned money when you receive the principal in small bits and pieces spread over a 6 to 8 years.
And of course, as always, kudos to you to point out very clearly this anomaly which actually no other analyst / blogger has pointed out.
Thank you Kamalji
Thank you Raja
Great write up sir. You have clearly mentioned the pros and cons of NHAI NCD. Please continue. Thank you
I’m reading your articles since 2018.Thanks for the valuable
knowledge/Information you are providing to your subscribers.
May you please guide me on my Mutual fund portfolio. I’m investing in following funds since 2017 and overall returns as on date is approximately 18%. All are direct and in growth fund
1. SBI BLUE CHIP- 10000
2. KOTAK FLEXICAP- 5000
3. PARAG PAREKH FLEXICAP-
4. MIRAE ASSET EMERGING
5. SUNDRAM LARGE & MIDCAP
FUND – 10000
I have my investment target up to 2030 and want to increase the SIP.
All are good funds, you can continue
How much grey market premium running for nhit ncd?
Howuch listing gain you expect?
This is NCD bond and not IPO which would have GMP