Wint Gold-Bricks Sept21 – Should you invest in these market linked debenture bonds?
Wint Wealth (Zerodha backed alternative debt asset platform) has come up with one more covered market linked debentures i.e., Wint Gold-Bricks Sept21 which offers high return of 11%. These debentures are covered by collateral properties. Like we indicated earlier, while the concept looks good, there are several risks associate while investing in such cover linked bonds. What are the features of Wint Gold-Bricks Sept21 covered market linked debentures? Should you invest in Wint Gold-Bricks September 2021 Covered MLDs that offer 11% interest rate? Is it safe to invest in Wint Gold Covered Market Linked Debentures (MLD)?
About Wint Wealth
Company indicates that their goal is to bridge gap between low-risk low return vs high risk high return investment options. They say its aim is to provide with moderate to high returns with risk is between high and low (like moderate).
Company was founded by some of the members from IIT and is backed up by big shots like Nithin Kamat (Zerodha), Kunal Shal (CRED), Praniv Yadav (Paytm money) etc.
It started offering market linked debentures (MLD) from 2020 onwards. Till now it has issued 6 Covered Market Linked Debentures and 1 covered bond / market linked debenture is in progress now.
What are covered bonds?
Covered bond is a secured bond that comes with bankruptcy protection. When such covered bond is linked with market it is called covered market linked debenture (MLD). Investors would get interest and repayment of capital till such time NBFC does not declare bankruptcy. If NBFC goes bankruptcy, the repayment would be done with the covered assets to protect investors.
Features of Wint Gold-Bricks Sept21 – Covered MLDs
Wint Gold-Bricks Sept21 is the name of the product offered by Wint Wealth.
- Wint Gold Bricks Sept 2021 asset is being launched on 8th September 2021.
- These Covered Market Linked Debentures are issued by its partner Dhanvarsha Finvest, NBFC company through Wint Wealth. Means, Wint Wealth is working as an intermediary for such bonds.
- The tenure of these Covered Market Linked Debentures are 15 months i.e., maturity date is 2-Dec-2022.
- Pre-tax returns are expected at 11% per annum.
- This is tax efficient product where one need to pay only 10% on the returns if investor holds for > 12 months. These are taxed like equity.
- This asset has an underlying collateral of gold and property loans which is minimum of 1.25 times the issue of Covered Market Linked Debentures. The size of the issue is Rs 15 Crores and collateral is Rs 19.2 Crores (1.25x).
- Interest would be paid on maturity after 15 months by NBFC directly.
- Minimum investment in Wint Gold-Bricks Sept21 asset by retail investors is Rs 10 Lakhs.
- Dhanvarsha Finvest (on behalf of whom Wint Wealth is issuing these MLD), is rated as BBB (Stable) by CARE Ratings.
How to invest in Wint Wealth Gold Sept-21 Covered Market Linked Debentures?
You can follow below steps:
Visit the block where it says “Start Investing”
Select the no. of lots you want to invest
Enter your name and email ID and click on sign-up
Enter your KYC details. This includes Demat account no, bank account number, IFSC code etc., Your interest payment would be paid to this bank account number.
It takes you to couple of more steps and to your bank account where you need to transfer funds.
The process might have couple of more steps to finish.
About Dhanvarsha Finvest (NBFC)
These debenture bonds are issued on behalf of Dhanvarsha Finvest; hence it is important to understand about the company.
Dhanvarsha is BSE listed NBFC company operating from Mumbai which offer different types of loans like Loan against property, Business Loan, Personal Loan, Education Loan, Medical Loan, etc.
Company has been rated as BBB by CARE Ratings and Infomerics Valuations and Ratings.
Did Wint Wealth offered such debenture bonds earlier?
Yes. They have offered following market linked debentures in the recent past.
1) 10% Wint Gold Aug 2020 – Offered by IIFL NBFC that has maturity in Feb-2021. These are repaid back now.
2) 11% Wint Gold Dec 2020 – Maturity in September-2022. These are 100% subscribed.
3) 10.25% Wint Wheels Mar 2021 for Rs 20 Crores Maturity in Mar-2023. These are 100% subscribed.
4) 9.5% Wint Bricks May 2021 for Rs 20 Crores maturity in Nov-2022. These are 100% subscribed.
5) 11% Wint Gold Jun 2021 for Rs 15 Crores Maturity in Sep-2022. These are 100% subscribed.
6) 9.5% Wint Bricks July 2021 for Rs 20 Crores maturity in Jul-2023. These are 100% subscribed
Why should you invest in Wint Wealth Gold September 2021?
Here are some reasons to invest:
1) This asset would provide high returns of 11% per annum. Currently interest rates offered by bank FDs or NCDs of financial institutions are low.
2) This is tax efficient investment option. Investors need to pay only 10% tax if held for > 12 months. The post-tax returns would be 9.9% per annum. If investors hold for < 12 months, the returns are taxed as per income tax slab applicable to them.
3) This MLDs offered have collateral securities by way of gold and property loans which is 1.25x of the total issue size. In case NBFC goes bankrupt or shuts down, WintWealth would collaborate and make the repayment of interest and principal to investors.
Why NOT to invest in Wint Wealth Gold September 2021 Covered Market Linked Debenture Bonds?
Here are few negative or hidden factors of this instrument.
1) The minimum investment is Rs 10 Lakhs which is very high. Retail investors might not afford to invest such high amount.
2) The credit rating of the company is BBB (Stable) by CARE Ratings and Infomerics Valuations and Ratings which is low. Such ratings can further fall without any advance intimation to investors. Investors should always invest in AAA / AA rated bonds which are one of the safe investment options.
3) There is credit risk in this investment option. While these instruments are covered by pool of assets, in case the NBFC company goes bankrupt, the process of liquidation of these assets might take longer time. One should recall what happened to DHFL secured NCD bonds investors. They are still waiting for their investments to be paid back to them along with interest.
4) There is liquidity risk in this option. You cannot sell them in the open market or to Wint Wealth before maturity. However, Wint Wealth gives an option to withdraw and if new buyers are available, these would be transferred to them.
5) Remember that in case the lender goes bankrupt, investors would get their investment along with interest. This interest amount would be higher than 11%, however not specifically indicated in the issue details.
6) There could be fraud risk in this covered bond. While it shows there are underlying collateral properties, but these might not exist. In such a case, investors can lose money.
Should you invest in Wint Wealth Gold Bricks September 2021?
These Covered Market Linked Debentures (MLDs) are relatively new to retail investors. These Wint gold debenture bonds offer 11% pretax returns and 9.9% post tax returns (if held for > 12 months). These debenture bonds have collateral cover of properties. This asset class is relatively new. The underlying company has low credit rating of BBB which is high risk. The size of the issue is Rs 15 Crore which is small and retail investors might not get allotment. The minimum investment ticket size of Rs 10 Lakhs makes the issue unattractive. Investors should be little cautious and understand all these risks before investing in such high-risk investment options.
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