JM Financial NCDs May-June 2018 Public Issue : Details & Review

The interest rates on Bank fixed deposits may have touched the lowest levels and the interest rates on popular small savings schemes are not very attractive either. Also, Tax Free Bond Issues are not available now. This is inducing many small investors to look out for better fixed income products which can give decent fixed rate of return.

NCDs or Non Convertible Debentures are one of the fixed income options that can satiate investors’ hunger for better yield.

JM Financial Credit Solutions Ltd (JMFCSL) is proposing to offer latest NCD issue. JM Financial is going to offer Secured and redeemable NCDs. The proposed public issue will be open for subscription from 28th May, 2018 to 20th June, 2018.

DHFL is also offering Secured NCDs from  22nd May, 2018 to 04th June, 2018.

What is a Debenture?

Debenture is a type of Debt instrument which offers a fixed rate of interest for a specified tenure. Companies or governments use debentures to borrow money. Debentures are simply loans taken by the companies and do not provide the ownership in the company.

What are NCDs?

Debentures are of two types Convertible and Non-Convertible. The convertible debentures are the ones that can be converted into equity shares at a later time. This convertibility provides attraction to the investor but yield lower interest rates. Non convertible debentures does not convert into equity shares thus can yield a higher interest rate.

An NCD can be Secured or Unsecured. Secured NCDs are backed by the issuer company’s assets to fulfill the debt obligation unlike unsecured NCDs. Below is a short video on ‘basics of NCDs’.

JM Financial Credit Solutions NCDs May 2018 Public Issue – Key Features

JM Financial is a non-banking finance company, provides integrated financial solutions to real estate developers with a focus
on residential project financing such as funding real estate developers at various stages in the life cycle of a real estate project. The product portfolio consists of Project Finance, Loans against property, Loans against shares, Project at early stage loans and Loans against
land.

Below are the few important details about upcoming JM Financial CSL NCD Issue in FY 2018-19;

  • NCD Issue opening Date : 28th May, 2018
  • Issue Closes on : 20th June, 2018.
  • Interest Rate or Coupon Rate on NCDs : The ROI ranges from 9.11% to 9.75% depending on the category of investor and tenure of the NCDs.
  • Issue Size : Base Issue size is Rs 300 cr (with an Option to retain over-subscription amount up to Rs 450 cr).
  • Mode of Issue : Demat
  • Face Value or Issue Price of one NCD is Rs 1,000.
  • Available Tenor options : 38 months to 10 years
  • Type of Interest Payment : Fixed
  • Frequency of Interest payment : Annual / Monthly. Cumulative option (38 months) is also available under this Issue.
  • Minimum Application size : Rs 10,000 (10 NCDs) and in multiple of Rs 1,000 thereafter.
  • Listing : The NCDs are proposed to be listed on BSE. The Secured NCDs shall be listed within 12 Working Days from the Issue Closing Date.
  • Security & Asset Cover : The Company and Promoter will create and maintain appropriate security in favour of the Debenture Trustee for the NCD Holders on the assets adequate to ensure required asset cover for the Secured NCDs.
  • Credit Ratings :  The NCDs have been rated [ICRA] AA/Stable by ICRA and IND AA/Stable by India Ratings.
  • Issue Allocation Ratio : 60% of the Issue is for individual investors (HNIs – individuals (applying for an amount of > Rs 10 lakh).
  • PUT & Call options : No Put & Call options are available. (What are Put & Call options? – NCDs can have Put or Call options. If a company issues a ‘Callable Debenture’, it means that it can be redeemed by the Issuer (company) before the bond’s maturity. A debenture with a ‘Put option’ works in exactly the opposite manner, wherein the investor can sell the bond to the issuer at a specified price before its maturity.)
  • Allotment of NCDs is on ‘first come, first served’ basis.
  • NRIs are not eligible to apply to this NCD issue.

JM Financial NCDs May-June 2018 Public Issue & Coupon Rates

JM Financial NCDs May-June 2018 Public Issue Latest NCD issue by JM Financial Credit Solutions Ltd

Should you invest in JM Financial Credit Solutions NCDs May-June 2018 Public Issue?

As we all are aware that interest rates on fixed income securities have reached their lowest levels. The bank interest rates are showing some signs of up-trend, hence it is advisable to avoid investing in medium to long-term NCDs now. Also, the NPA (Non-Performing Assets) related problems have been plaguing the banking sector (NBFCs as well). Considering this scenario, if you are looking for regular interest income and are in 10% or 20% income tax slab rate, you may consider investing in around three year Secured NCDs.

Though DHFL is offering slightly lower interest rates, you may prefer DHFL NCDs to JM CSL NCDs, in case DHFL issue is still open for subscription after 28th May, 2018.

Before investing in NCDs, kindly calculate your post tax returns on debentures and take your decision, as the interest payouts are taxable.

Post-tax returns = Pre-Tax returns * { (100-Tax Rate) / 100 }

Are NCDs totally risk-free? – No, they are not risk-free. These carry higher risk than bank deposits. The main risk with NCDs is default risk. The issuer may not be able pay the interest payments.

NCDs are relatively safer assets than Stocks and mutual funds but they are riskier than bank FDs and Government bonds. NCD Issuers normally do not default but when things go drastically wrong, they may face problem in paying the investors.

The main risk with NCDs is default risk. The issuer may not be able to pay the interest payments. NCD Issuers, especially the top business groups, normally do not default but when things go drastically wrong, they may face problem in paying the investors. In such a scenario, secured NCD holders (if any) would be given higher priority than the holders of Subordinated NCDs.

Kindly keep in mind all the above points when investing in NCDs. Also, do not invest your entire savings or investible surplus in one NCD issue alone.

You may consider other alternative fixed income avenues like Debt oriented Mutual Funds, Hybrid Mutual Funds, Post office MIS scheme, Post office Senior Citizen Savings Scheme, 7.75% GoI Bonds etc.,

Have you invested in any of the recent Public Issues of NCDs? Do you prefer NCDs to Bank FDs? Do you believe that upcoming NCDs may offer even better interest rates? Kindly share your views. Cheers!

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(Featured Image courtesy of Vichaya Kiatying-Angsulee at FreeDigitalPhotos.net) (Post first published on : 22-May-2018) (This article is based on limited available information, if required, the content will be edited.)

  • Kundan says:

    Dear Sir, I’ve got interest certificate for FY 2017–18 from SBI, it shows Interest-Paid = 59397, Interest-Accrual= 20507. Q1- Which value should I take as FD interest income for my ITR? Q2- I believe it comes under “income from other sources” in ITR, kindly confirm.

    Above value includes Rs. 1685 (paid) and 90 (accruals) for Savings A/c interest.
    Q3- Do I need to subtract the SB a/c interest values from above values as it’s under different section?

  • inox capitals says:

    Hi sir, Really very good informative blog again

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