In an atmosphere where the non-banking finance companies or NBFCs are said to be passing through a crisis, two companies, IIFL and JM Financial, who may otherwise have a good track record, are issuing non-convertible debentures (NCDs) at interest yields in the range of 10.40% to 10.50%. A mint report lists out the several options in terms of the tenures and the interest rates within these offers.
NCDs are a way for companies to raise long-term capital through a public issue of a debt instrument with a fixed period. And those who invest in them receive interest regularly at the given rate.
India Infoline Finance Ltd (IIFL)’s NCD offer will close on August 30. So, you have hardly 20-odd days to make the decision to invest in these. The size of the issue is Rs 100 crore but the company can retain up to Rs 900 crore more, if there is an over subscription. You can choose a minimum investment of Rs 10,000. IIFL has opted to offer the NCDs in six series, I to VI and each will have a different tenure, interest rate and interest pay-out schedule. So, you can select from tenures of 15, 39 and 69 months and interest payable monthly, quarterly, annually and on maturity. Depending on the tenure, the interest rate can vary from a low of 9.85% to a high of 10.5%. Go through the prospectus before making the right choice that suits you.
The IIFL NCDs have a rating of AA by CRISIL and ICRA.
As far as the other set of NCDs from JM Financial Products, the NBFC arm of JM Financial Group is concerned, the investment window is open till September 4.
With a similar Rs 100 crore issue size with a minimum ticket of Rs 10,000, JM Financial can retain up to Rs 400 crore of additional subscription in the event of the NCDs being oversubscribed.
These NCDs have Series I to V and you have 38 months and 60 months tenure options to select from with interest being paid either annually or on maturity. There is one Series V that will run for 84 months and the interest rate is 10.40% which is the highest among the NCDs offered by this NBFC. The other rates are 9.85% and 10.2%.
These NCDs too, enjoy the same AA rating by both CRISIL and ICRA.
If you also wish to know if it is advisable to make investments in the NCDs being offered by IIFL and JM Financial, experts offer the opinion that the risk element in any NCD issued by NBFCs is invariably high and those investors who do not mind the risk associated with them can go ahead and buy. The expert opinion on this is that any NCD that has a rating of less than AAA is not safe to invest.
There is also the issue of liquidity in these instruments; you will hardly be able to sell them in the market.