Edelweiss Financial Services Secured Redeemable NCDs Launched –– Should You Invest?
Listen to Edelweiss Financial Services Secured Redeemable NCDs Launched –– Should You Invest?
00:00
00:00
Edelweiss Financial Services has launched the public issue of its secured, redeemable non-convertible debentures (NCDs). The total size of the issue is Rs 200 crore with the option to retain over-subscription (greenshoe option) up to Rs 200 crore.
The issue opened for subscription on August 17, 2021 and will close on September 06, 2021. The allotment will be on a first come first serve basis.
As the name suggests these NCDs cannot be converted into the equity shares of the company after a specified period. The company will repay the principal amount to the NCD holder at the time of maturity.
Key highlights of Edelweiss Financial Services NCD
Edelweiss Financial Services non-convertible debentures (NCDs) is available for tenures of 36 months, 60 months, and 120 months. You can select from the monthly, annual, and cumulative interest payout option. These NCDs carry an interest rate in the range of 8.75% to 9.70% depending on the tenure and interest payout option you choose. This translates into effective annual yield in the range of 9.09% to 9.70%.
If you hold equity shares of Edelweiss Financial Services or NCDs previously issued by the company and/or its group companies, you will be eligible to receive an additional incentive of 0.20% per annum. The additional payment will apply to investors in Series I, II, IV, V, VII, and/or VIII NCDs.
Table 1: Details of Edelweiss Financial Services NCD
(Source: Edelweiss Financial Services NCD Product note)
Equirus Capital is the lead manager for the issue. The face value of each bond is Rs 1,000. The minimum application is available for 10 NCDs, i.e. Rs 10,000. Thereafter, you can invest in multiples of Rs 1,000. Acuité Ratings & Research has assigned the NCD AA rating with Negative Outlook while ICRA has assigned it A+ rating with Negative Outlook.
You must have an active DEMAT account to get the allotment of the NCDs. Edelweiss Financial Services NCD will be listed on BSE within 6 working days from the date of the issue closure.
Image source: yanalya - www.freepik.com
About the issuer - Edelweiss Financial Services
Edelweiss Financial Services Limited was incorporated on November 21, 1995 under the name Edelweiss Capital Limited. It started operations as an investment banking firm after receipt of a Category II license from SEBI.
Subsequently, Edelweiss Capital Limited received a Category I Merchant Banker license from SEBI with effect from October 16, 2000. The name of Edelweiss Capital Limited was changed to 'Edelweiss Financial Services Limited' with effect from August 1, 2011.
Edelweiss Financial Services is one of India's leading financial services conglomerates, offering a robust platform to a diversified client base across domestic and global geographies. Its key lines of business include:
- Credit (Retail, Corporate)
- Investment & Advisory (Wealth Management, Asset Management)
- Insurance (Life, General)
The group has a sizeable presence in the retail segment through its businesses such as, Life Insurance, Housing Finance, Mutual Fund, and Retail Financial Markets. It has a network of over 476 offices with close to 11,000 employees that service a strong client base of 1.2 million.
Table 2: Key financial indicators of Edelweiss Financial Services over the years
(Source: Edelweiss Financial Services NCD Prospectus)
Objective of NCD issue
Edelweiss Financial Services will utilise the proceeds from the NCD for repayment/ prepayment of interest and principal of existing borrowings (at least 75% of the amount raised), and for general corporate purposes.
Tax implications
Interest income from NCDs if held till maturity is taxable as per your income tax slab. If you sell the NCDs within year on stocks exchange, then short term capital gain tax will apply at the income tax rate applicable to you. If you sell the NCD after one year but before its maturity, long term capital gains tax will be applicable at 20% with indexation.
Should you invest in Edelweiss Financial Services NCD?
Investment in non-convertible debentures has gained popularity amid the current low interest rate environment. NCDs offer anywhere between 8%-10% interest rate per annum as compared to around 5% from bank fixed deposit. However, do note that the higher interest rate NCDs offer is to compensate for the risk associated.
Rating agency ICRA has assigned Edelweiss Financial Services NCD A+ rating with negative outlook which implies some level of credit risk. According to ICRA, the group's liquidity position is adequate. Moreover, its diversified revenue streams and strong presence in the wealth management, asset reconstruction, and capital markets are key strengths.
However, the group has reported deterioration in the asset quality over the past two fiscals. ICRA expects that in the bear term its portfolio will continue to face stress and subdued profitability due to the declining loan book as well as net interest income and the challenging external environment.
Notably, many NBFCs have been going through a liquidity crunch since the IL&FS fallout. The pandemic has further added to the stress in the balance sheet and has raised concerns about asset quality.
Debt instruments other than those rated AAA are less liquid in the secondary market. Therefore, you should ideally prefer NCDs that are AAA rated.
This makes Edelweiss Financial Services NCD suitable for only for investors with high risk appetite who understand the credit environment. Investors who prefer safety of capital should give Edelweiss Financial Services NCD a miss.
Warm Regards,
Divya Grover
Research Analyst
Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds