Edelweiss Financial Services Ltd, a category I Merchant Banker and the parent company of the Edelweiss Group, is offering Non-Convertible Debentures (NCDs) to the public. The money so raised will primarily be used for pre/repayment of debt, and the rest can be used for other corporate purposes. The offer opens on 23 Dec, 2020 and closes on 15 Jan, 2021. The NCDs carry a face value of Rs 1,000 with a minimum application size of Rs 10,000.
Interest rate offerings
Investors have 7 options to choose from this debentures/bonds offer. There are 3 tenures – 36 months (3 years), 60 months (5 years) and 120 months (10 years). There are annual and cumulative interest payment under 36 months and 60 months options. There is a monthly interest payment under 60 months and 120 months options. You get monthly, annual and cumulative interest payment only under 60 months option. Cumulative means if you hold till maturity.
Let’s look at some options. The 3-year cumulative NCDs can fetch you 9.35% per annum. The 5-year cumulative NCDs can fetch you 9.8%. The 10-year annual option gives 9.95%.
The rates offered by the Edelweiss Financial Services NCDs are attractive relative to yields prevailing in the market. Currently, market yields on corporate bonds with the same credit rating as Edelweiss Financial Servicesâ€™ debentures (CARE has given A+ rating) hover at 8.7% for 3 years, 10.3% for 5 years and 11.4% for 10 years. Brickwork Ratings has given a AA- (Double A minus) rating to Edelweiss Financial Services’ debentures. The market yields on corporate bonds with same credit rating hover at 8.52% for 3 years, 9.72% for 5 years and 10.82% for 10 years.
Hence, the interest rates offered by Edelweiss Financial Services are attractive relative to corporate bonds yields prevailing in the market in the three-year and five-year option if you take Brickwork’s AA minus rating given to the Edelweiss parent company. From a spread perspective, the 3 year option makes sense if you have adequate risk appetite.
Fully secured NCDs
The NCDs being offered are proposed to be fully secured by way of first pari-passu/ specified charge in favour of the Debenture Trustee (Beacon Trusteeship) on an identified immovable property and/or future receivables of Edelweiss Financial Services, created in favour of the Debenture Trustee. This will be as specifically set out in and fully described in the Debenture Trust Deed, except those receivables specifically and exclusively charged in favour of certain existing charge holders. All this will be done in a way that a security cover of at least 100% of the outstanding principal amounts of the NCDs and interest thereon is maintained at all time until the Maturity Date.
Do note the Edelweiss debentures/bonds do not carry any Put or Call options. The debentures will be listed on the exchange where investors can exit before maturity. Remember that such a exit will be subject to actual trading volumes and the market price may vary from face value.
Interest income on NCDs is taxable at your slab rate whether on pay-out or under the cumulative option. If you sell the bond in the exchanges in less than a year, short-term capital gains, at your tax slab, will be applicable. If you sell after a year of holding, then long-term capital gains tax without indexation will apply.
If you would like to subscribe to Edelweiss NCDs, contact Wealthzi team at [email protected] or open an account at www.wealthzi.com