The non-convertible debenture (NCD) offer from India Infoline Finance Ltd (IIFL), a non-banking finance company (NBFC), opened for subscription on Tuesday. The offer will remain open till 20 August 2019. The minimum application amount is₹10,000 for retail investors.
IIFL, which is primarily engaged in the business of loans and mortgages, wealth and asset management, retail and institutional broking and investment banking, is looking to raise a minimum of ₹100 crore with the option to retain another ₹900 crore in case of oversubscription.
The NCD offer has been rated AA (stable) by CRISIL and ICRA. They have been rated AA+ (stable) by Brickwork Ratings.
The NCD is being offered in six series. Series I, III and VI will pay out interest at the end of tenures of 15 months, 39 months and 69 months at cumulative interest rates of 10%, 9.85% and 10.5%, respectively. Series II comes with a tenure of 39 months and will pay quarterly interest of 9.5%. Series IV has a tenor of 39 months and will pay annual interest of 9.85%. Series V has a tenor of 69 months and will pay monthly interest of 10%. Series I to IV are secured, whereas Series V and VI are unsecured in nature.
Investors can only hold the NCDs in demat mode. There’s no tax deducted at source (TDS) on the interest paid, but since the interest is taxable at income tax slab rates, investors will have to compute it and pay themselves.
How do you apply?
If you want to apply for the NCD issue, you need to submit an application form to your bank or broker, authorizing the intermediary to block the amount you want to invest. The bank needs to be a self-certified syndicate bank (SCSB), a list of which you can get here. Some banks or brokers will allow you to submit this form online.
Should you invest?
Only investors willing to take a high degree of risk should invest. While on the positive side, you get a fixed rate of interest, on the negative side you are taking the risk of the issuer defaulting. On the other hand, a debt mutual fund gives you access to a basket of NCDs and other types of paper and is, hence, a less risky option. One way to reduce your risk is to opt for the shortest possible tenor.
As mentioned earlier, note that interest paid by NCDs is taxed at your income tax slab rate.
Although the NCDs will be listed on the stock exchanges, liquidity tends to be poor in these instruments. It is difficult to exit them before maturity, so make sure your time horizon is aligned with the tenor of the NCD.