Date of Post: 21/01/17
Last year has witnessed several Public issue of Non Convertible Debentures (NCD) by reputed companies. The renewed charge has been led by NBFC and Housing Finance companies who desire to bring down their borrowing from banks and in the process also decrease their average cost of funds. A review of these NCDs have been attempted to identifythe NCD Investment options that can give better returns to the investors.
These NCD issues have evinced good interest from retail and institutional investors due to Low interest rates offered by Banks and further expectation of lowering of interest rates in due course. This year has already witnessed three Public issues by Reliance Home Finance Ltd ( Rs. 3500 crore) , SREI Equipment Finance Ltd. (500 cr) and Muthooth Finance( Rs. 1400 crore).
It is a known phenomenon and that in the initial period after listing, there is a selling pressure in NCDs and the yield offered is sometimes better than the original NCD issue which gets narrowed down over a period of time. The effective yield from these NCDS to an investor who purchases these NCDs from secondary market can be evaluated from it Yield to Maturity Ratio(YTM). YTM for a bond is the total return, interest plus capital gain, obtained from a bond held till its maturity. It is expressed as a percentage and tells an investor what his return on investment will be if he purchases the bond and holds on to it until the redemption of the bond.
Details of all important NCDs which have gone public from 2016 beginning along with Yield to Maturity (YTM) Ratio is indicated in the Table below based in Market prices as on 20/01/2017
| NCD Name | Coupon | Interest | Rating | FV | Mrkt price | YTM | ISIN | NSE Code | BSE Code | Issue Dt | interest due on | Redemption on |
| SREI Infra | 10 | Annual | AA+(BWR) | 1000 | 1030 | 9.97% | INE872A07UB7 | SREINFRA Y1 | 935898 | 06-10-16 | 06-10-17 | 06-10-21 |
| EHFL | 10 | Annual | AA | 1000 | 1069 | 9.72% | INE530L07228 | EHFLNCD N6 | 935788 | 19-07-16 | 19-07-17 | 19-07-26 |
| IBUL HSG Fin | 9.15 | Annual | AAA | 1000 | 1021.9 | 9.26% | INE148I08256 | IBULHSGFIN NE | 935868 | 26-09-16 | 26-09-17 | 26-09-26 |
| DHFL TierII | 9.25 | Annual | AAA | 1000 | 1017.01 | 9.58% | INE202B07IO3 | DHFL NP | 935840 | 09-09-16 | 09-09-17 | 09-09-23 |
| DHFL TierI | 9.3 | Annual | AAA | 1000 | 1025.5 | 9.52% | INE202B07HV0 | DHFL NC | 935814 | 16-08-16 | 16-08-17 | 16-08-26 |
| MMFSL | 9 | Annual | AAA | 1000 | 1088 | 8.53% | INE774D08MA6 | 935752 | 06-06-16 | 06-06-17 | 06-06-26 | |
| SEPL | 9.75 | Annual | AA+(BWR) | 1000 | 985.34 | 9.98% | INE881J07EN8 | 935940 | 17-01-17 | 01-04-18 | 17-01-22 | |
| RHFL | 9.4 | Annual | AA+ | 1000 | 982.5 | 9.73% | INE217K08289 | RHPL N8 | 935916 | 03-01-17 | 03-01-18 | 03-01-32 |
Other than MMFSL(Mahindra & Mahindra Finance Ltd.) NCDs, which is ruling at YTM of 8.53, all other NCDs including the AAA rates\d ones of . DHFL (Dewan Housing Finance Ltd.) and India Bull Housing are giving > 9% p.a. YTM
These 9% Plus p.a. NCD present good opportunities though they are not as safe as bank FD even though AAA rated instruments carry high degree of safety. A small investment in these NCDs can be seen as a means of diversifying ones investments and also satiate one’s desire for better yield.