Wint Wealth Bricks May 2021 – Covered Market Linked Debentures – Review
Wint Wealth (Zerodha backed alternative debt asset platform) has launched Bricks May 2021 Covered Market Linked Debentures which offers high returns. These debentures are covered by collateral properties. While the concept looks good, there are several ifs and buts while investing in this cover linked bonds. What is this Wint Bricks May 2021 covered market linked debentures all about? Should you invest in Wint Wealth Bricks May 2021 Covered Market Linked Debentures that offer 9.5% interest rate? Is it safe to invest in Wint Bricks Covered Market Linked Debentures?
About Wint Wealth
You would not have heard much about this company till few days back. This company suddenly came into limelight saying it is offering Covered Market Linked Debentures which are covered bonds that offers 9.5% returns per annum which is safe investment option.
Wint Wealth is a fixed income platform where you can invest in fixed income products that give better returns than debt funds or fixed deposits. Company website indicate that it was formed after seeing huge gap between low-risk low return vs high risk high return investment options. Can investors get moderate returns to high returns with risk is between high and low (like moderate).
Company was founded by some of the members from IIT and as per company website it says it 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 3 Covered Market Linked Debentures and 1 covered bond / market linked debenture is in progress.
Key Features of Wint Wealth Bricks May 2021 – Covered Market Linked Debentures
Wint Bricks May 2021 is the name of the product offered by Wint Wealth.
Win Bricks May 2021 asset is launched on 31-May-2021.
These Covered Market Linked Debentures are issued by its partner Ugro Capital Limited, NBFC company through Wint Wealth. Means, Wint Wealth is working as a mediator / broker for such transactions.
The tenure of these Covered Market Linked Debentures are 18 months i.e., maturity date is 25-Nov-2022.
Pre-tax returns are expected at 9.5% 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 property of loans which is minimum of 1.25 times the issue of Covered Market Linked Debentures. The size of the issue is Rs 20 Crores and collateral size is Rs 25 Crores (1.25x).
Interest would be paid on maturity after 18 months.
Minimum investment in Wint Bricks May 2021 asset by retail investors is Rs 10,000.
NBFC Ugro Capital (on behalf of whom Wint Wealth is issuing these MLD), is rated as A (Stable) by Acuite Ratings.
How to invest in Wint Wealth Bricks May 2021 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
Click on “invest now”
Enter your phone number and enter OTP (if you already logged in, skip this and next line item)
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 would look like below screen.
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.
Who is U Gro Capital?
This debenture bonds are issued on behalf of U Gro Capital, hence it is important to understand the company. U Gro Capital is BSE listed technology company which focuses on addressing capital needs of small businesses operating in select sectors with customized loan solutions.
Company has been rated as A (Stable) by Acuite Ratings. Here is the AUM, Gross NPA and Net NPA of the company.
How does this asset compare to other alternative options?
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 June-2022. These are 100% subscribed.
3) 10.25% Wint Wheels Mar 2021 for Rs 20 Crores Maturity in Mar-2023. These are 100% subscribed.
What is the Cover Pool / Collateral of the bonds?
The cover pool is characterized across regions and assets.
Why should you invest in Wint Wealth Bricks May 2021?
Here are some reasons to invest:
1) This asset would provide high returns of 9.5% per annum. If you observe, debt funds or bank fixed deposits offer low returns of 5% to 7%.
2) Investors can invest as low as Rs 10,000 and enjoy high returns.
3) This is tax efficient investment option. Investors need to pay only 10% tax if held for > 12 months. The post-tax returns would be 8.55% per annum. If investors hold for < 12 months, the returns are taxed as per income tax slab applicable to them.
Why NOT to invest in Wint Wealth Bricks May 2021 Covered Market Linked Debenture Bonds?
Here are few negative or hidden factors of this instrument.
1) 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 returned along with interest.
2) 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.
3) Remember that in case the lender goes bankrupt, investors would get their investment along with interest in maximum period of 96 months. However, investors can get interest of 13.5% instead of 9.5% in case of such event for the extra period.
4) 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.
5) The credit rating of this debt instrument is A (Stable) by Acuitie Ratings which is very low. Such ratings can further fall to “B” without any advance intimation to investors. Investors should always invest in AAA rated bonds which are one of the safe investment options.
Should you invest in Win Bricks MLD May 2021 Debenture Bonds offering 9.5% returns?
These Covered Market Linked Debentures (MLDs) are relatively new to retail investors. These debenture bonds offer 9.5% pretax returns and 8.55% post tax returns (if held for > 12 months). These debenture bonds have collateral cover of properties. This asset class is relatively new. The size of the issue is Rs 20 Crore only which is small and retail investors might not get allotment. Investors should be little cautious and understand all these risks before investing in such high-risk investment options.
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