A new non-convertible debenture (NCD) offering has been introduced, aimed at raising up to Rs 190 crore through private placement. Investors who are looking for steady returns on their investment might want to take a closer look at this opportunity. Let’s break down the important details of this offering.
Understanding the NCD Issuance
Poonawalla Fincorp, the issuer of these NCDs, is offering bonds with a face value of Rs 1 lakh each. The coupon rate for these bonds is 2% over the base rate, which makes them a competitive offering in terms of fixed income. The company plans to raise Rs 100 crore initially, with a green shoe option that could bring the total to Rs 190 crore.
These NCDs will also be redeemable, meaning investors will receive their principal amount back at the end of the tenure, assuming no defaults. Additionally, the bonds will be listed on the Bombay Stock Exchange (BSE), adding the benefit of liquidity, allowing investors to trade these debentures if they wish to exit early.
Background and Market Position of the Company
The company behind this NCD issuance is part of the Cyrus Poonawalla Group, a well-established name in the Indian market. It offers a wide range of financial services, including loans for cars, personal loans, business loans, machinery loans, and more. This diverse product range enables the company to tap into various customer segments, which helps spread its risk.
As of September 2024, the company’s assets under management stood at Rs 28,396 crore, reflecting its strong market position. However, despite its large asset base, the company reported a net loss of Rs 471.04 crore in Q2 FY25, compared to a profit of Rs 860.17 crore in the same quarter last year. This significant loss raises questions about the company’s near-term prospects.
Features of the NCDs
The NCDs offered by the company have a face value of Rs 1 lakh and come with a coupon rate that is 2% higher than the base rate. This makes them a potentially attractive option for those seeking stable returns in a relatively low-risk environment. The bonds are secured, rated, and will be listed on the Bombay Stock Exchange (BSE), adding credibility to the offering.
The fact that these NCDs are redeemable gives investors confidence that they will get their principal back at maturity. Furthermore, being listed on the BSE offers liquidity, as investors will be able to sell their holdings on the open market.
Why is the Company Issuing These NCDs?
The main goal of issuing these NCDs is to raise capital, which can be used for business expansion, managing existing debt, or supporting other growth strategies. The green shoe option provides flexibility, allowing the company to increase the total amount raised if there is strong demand from investors.
While the company has faced financial difficulties in recent quarters, the issuance of NCDs can help strengthen its financial position and support its recovery efforts.
Should Investors Consider These NCDs?
For those looking to invest in fixed-income products, these NCDs offer an attractive coupon rate and the security of a secured bond. However, the company’s recent financial loss is a factor that investors should consider carefully. If you are comfortable with some degree of risk and are seeking steady returns, these NCDs could be worth adding to your portfolio.
Liquidity: A Key Advantage
One of the key selling points of these NCDs is their liquidity, thanks to their listing on the Bombay Stock Exchange. This feature offers investors the flexibility to trade their bonds, making them a more attractive investment option than traditional fixed-income products.
Is This NCD Offering Right for You?
Investing in NCDs from a well-established company with a solid market position could be a good strategy for those seeking steady returns. However, it’s important to consider the company’s recent financial performance before making any investment decisions. If you’re comfortable with the risks and are looking for fixed returns, these NCDs might be worth considering.
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