Should you invest in it?

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Edelweiss Group’s non-depository housing finance company is offering a public issue of secured non-convertible redeemable debentures (NCDs) with a face value of Rs 1,000 each, amounting to Rs 150 crore in the base issue and a option to keep more subscription up to Rs 150 crore, totaling up to Rs 300 crore. This means that the initial issue size is Rs 150 crore and if the issue is oversubscribed, the issue size can be extended to Rs 300 crore.

Occupancy and Coupon Rate

The issue gives investors the option to choose from 10 series of NCDs bearing a fixed coupon and with terms of 24, 36, 60 and 120 months with annual, monthly and cumulative interest options. This means that an investor can choose the term and interest payment according to their financial needs. The coupon ranges from 8.50% to 9.70% per annum. The issue offers an additional incentive of up to 0.20% per annum to its existing investors who hold NCDs or bonds previously issued by this company or a group company such as Edelweiss Financial Services, Edelweiss Retail Finance or Edelweiss Finance & Investments.

According to the company, the majority of the funds (75%) raised through this issuance will be used for subsequent lending, financing and repayment and prepayment of interest and principal of the company’s existing borrowings. The remaining 25 percent of the funds will be used for general corporate purposes.

Risk and Rating

CRISIL and ACUITE gave the NCD AA-/Negative perspective. This technically means that the problem carries a moderate risk. Here, the negative outlook means that the rating of the issue could be downgraded in the future.

Liquidity through listing

MNTs will be listed on the BSE to provide liquidity to investors. Remember that although the quote provides you with liquidity, but considering that it may be low, NCDs are traded at a discount.

Outlook Money Taking

The NCD offers a decent coupon rate if you compare it to your bank fixed deposit, which offers yields in the range of 6.10-6.50%. However, NTMs carry the risk of default. Given the current inflationary trend, interest rates are likely to increase on your bank term deposits. In such a scenario, conservative investors can avoid the NCD. If you are willing to take risks for slightly higher returns, you can invest some of your capital to increase your overall fixed income returns.

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