Earn up to 11% by investing in NCD

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Maintaining a regular investment regime is crucial in building a solid financial foundation in the long run. However, tactful investment strategies mandate an early start and thorough due diligence. The earlier you start planning, the higher are your chances to enlarge your financial growth with due course of time.

Starting early can also allow taking risks when investing in diverse investment ventures, thereby shaping your lifestyle habits disciplinarily. So, if you are willing to start investing responsibly yet caught in a dilemma about which investment channel to opt for, consider head starting your investment routine with non-convertible debentures (NCDs).

Why Invest in NCDs?

Fixed income investors have been facing quite a dearth of investment channels due to a lack of tax-adequate free bond issues. While a potential investor can buy high-yield tax free bonds listed in the secondary market, these often come at a premium. In such a scenario, the trend has been such where high-yield seeking investors are turning to corporate fixed deposits on non-convertible debentures (NCDs) lately.

However, NCDs offer higher returns when compared to corporate FDs, and hence have shot to fame in very less time. Typically, NCDs offer around 100-200 bps more than bank FDs and around 100 bps or 1% more than that of corporate FDs. The good news is that all forthcoming NCDs are also expected to unfold similar interest rates.

NCDs have grown to popularity because unlike corporate FDs these debentures ca be bought in the dematerialized form and are freely tradeable, hence leveraging the scope of liquidity even more. If you please to buy a bond in a demat form, you can also save a hefty amount on paying TDS! This keeps away investors from the hassle of filling up forms 15G/H to claim exemption.

In case of buying an NCD in a physical form, TDS is applicable only if the annual interest pay-out exceeds Rs 5000. Moreover, if you keep aside post-tax returns, a 9.5% debenture can still yield around 7.6% and 8.55% for investors who are in a 20% and 10% tax bracket respectively.

One of the many other noteworthy mentions about NCDs is that it fetches better capital appreciation on principal in comparison to corporate FDs. This is because prices of bonds and interest rates progress in two opposite directions, extending you an opportunity of selling them whilst earning a profit.

You are not compelled to hold on to them until maturity. NCDs are also eligible for long-term capital gains after a year, and these gains from purchase are taxed at 10% without indexation. Interests earned on these NCDs are added to the investor’s income and thereafter taxed as per the applicable slab.

Why invest in Indiabulls Consumer Finance Ltd. NCD?

Indiabulls Consumer Finance Ltd. is a 100% subsidiary of Indiabulls Ventures Limited, which over the years has established its credibility of providing exclusive financial services such as lending, brokering, wealth management, etc. across the country. As at March 31, 2018, its gross NPA as a percentage of AUM was 0.32%, and net NPAs recorded to 0.08%, thereby reaffirming its stature in the BFSI sector.

Highlights of ICFL NCD Investment

  • Interest Rate: 10.75% to 11% depending on category of investor and tenure
  • Issue Size: Base Issue Size of Rs 250 Cr along with a green shoe option of Rs. 2,750 Cr
  • Mode of Issue: Demat only
  • Base Value: Rs 10,000 for one NCD
  • Available Tenure: 26/38/60 months
  • Rating: AA+ by Brickwork Ratings, AA by CARE
  • Frequency of Interest Payment: Monthly, Annual, Cumulative
  • Minimum Application Size: Rs 10,000
  • Listing: Listed on BSE & NSE Stock Exchanges
  • Security & Asset Cover: In favour of Debenture Trustee for NCD holders with secured NCDs
  • Allotment: First come first serve basis

So, what are you waiting for? Given the up-trend in interest rates, it is advisable to invest in medium to long term NCDs, alongside your regular investments;it is the right time to invest in ICFL NCDs without any inhibitions.

Indiabulls Consumer Finance Issue is Open for subscription now, Please click here to subscribe http://www.indiabullsconsumerfinance.com/

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and is an expert in helping people save Taxes legally. He can be reached by booking an appointment for Tax Advisory Service.