Financing The Financer
9/20/2012 9:00 PM Thursday
Fresh in the recent spate of corporate fund raising initiatives, the Muthoot Finance and Religare Finvest NCDs are offering investors attractive coupon rates and terms. Vidrum Mehta tells investors whether to invest in these.
Non-Convertible Debentures (NCDs) seem to be in vogue of late. And why not, when on one hand investors get an attractive coupon rate, and on the other, companies are able to raise funds easily even in an uncertain
environment. Investors usually get a coupon rate that is 200-300 basis points higher than those that regular fixed deposits in banks yield. Further, in the current higher interest rate scenario, these NCDs offer a very attractive rate, which tempts investors to park at least a portion of their portfolio in them.
This is evident from the fact that the recent NCD issues are receiving a very encouraging response from investors. In a short span of 15-20 days, around four to five companies have tapped the market to raise funds through the NCD route. These companies will raise approximately around Rs 2150 crore in funds in a short span of around one month.
This spate of NCDs was kick-started by India Infoline Finance (IIFL) through its NCD issue on 5th September 2012. The issue received an overwhelming response from investors and was oversubscribed by approximately 2.36x. Soon after came the Shriram City Union Finance NCD issue on 12th September, 2012 (at the time of writing this article, it was subscribed by 0.89x). We had carried analyses of these two NCD issues (available on our website www.dsij.in). Going ahead, SREI Infrastructure Finance is also raising funds through the NCD route.
At present, there are two companies that are tapping the market with their NCD issues, viz. Muthoot Finance and Religare Finvest. Are they worth investing in or should investors give them a miss? Here is a detailed analysis of the two issues that would help our readers.
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