The company had earlier raised Rs 17,392.20 crore through 24 public NCDs in 2011. NCD of Muthoot Finance will be closed on 29 April. Its face value is 1000 rupees and the maximum application size is 10 thousand rupees.
Gold Loan Non Banking Financial Company (NBFC) Muthoot Finance launched Non Convertible Debentures (NCDs) on Thursday. This is the 25th edition of NCD of Muthoot Finance. The company’s focus is to earn Rs 1,700 crore in the market through NCDs. Muthoot’s NCD has been given AA Plus status by the rating agencies. According to the company, interest on NCDs can be obtained from 6.60% to 8.25% per annum. Let us tell you that NCDs were bought like shares through a demat account. However, you can buy it by filling the form. Experts say that investors can invest in NCDs for 2-3, 5 and 10 years.
There are two ways to sell them. The first can be sold through the stock market. At the same time, the second way is by direct transfer. To sell in the stock market, first you have to convert your debenture into demat. Then you have to tell your stock broker that you want to sell them. He finds a buyer for you. In the direct transfer, you have to find the buyer yourself. Then it will have to be given to the company.
What are NCDs?
NCDs are non-convertible debentures or financial instruments. The company issues these. Through them, she raises money from investors. Like the IPO, this issue also comes. Those who invest in it get interest at a fixed rate. Secured and Unsecured. Secured NCD stands for debentures in which the company is not at risk of default. There is security of the company in this. In simple words, if the company fails to pay, then investors can withdraw their money by selling their assets.
Principal is also available along with interest.
The duration of NCD is fixed. On their maturity, investors get their principal amount with interest. These banks are debt instruments like FDs. Here debt means fixed income. Some debentures can be converted into shares after a fixed period. However, this is not possible in the case of NCDs. That is why they are called non-convertible debentures.
In other words, if the company fails to pay, then investors can withdraw their money by selling their assets. Unsecured NCDs do not have the security of the company. This way they have more risk than Secured.
Where is the chance to earn now
The base issue size of Muthoot’s NCD is 100 crores and there is an option to get an oversubscription of 1600 crores. Rating agency Crisil Limited and ICRA Limited have secured Secured NCDs as AA Plus. This rating means Debenture’s credit risk is very low and it is not as safe as AAA minus rated NCDs.
Experts tell that when the company needs money, it issues its debentures in the market. These are issued for a fixed period. On their maturity, the company returns the interest to the investors along with the principal amount of the investment. By the way, the company can also pay interest on monthly, quarterly and yearly basis. If you do not take interest, then you get your money with principal and interest at maturity.
Multiple earning opportunities
Muthoot has provided 8 investment options through NCDs, on which interest can be obtained on a monthly or yearly basis. There is an option to get payment even if the NCD matures. Investors in Secured NCDs can deposit their money for 26 months, 38, 60 and 120 months. These NCDs can be listed on the Bombay Stock Exchange. However, investors should understand that secured NCD does not mean that it is completely risk free.
George Alexander Muthoot, managing director of Muthoot Finance, told ‘Mint’ that investors are going to get double benefit in this issue (NCD). They will also get attractive interest rate with good NCD rating. The company has also launched a 10-year NCD and this is for investors who want to deposit their money for a long time. The company had earlier raised Rs 17,392.20 crore through 24 public NCDs in 2011. NCD of Muthoot Finance will be closed on 29 April. Its face value is 1000 rupees and the maximum application size is 10 thousand rupees.
Danger to small investors!
Experts about NCDs say that small investors should stay away from NCDs. Higher interest rate means greater risk. For those who can take a high risk in investing, NCD can prove to be a better tool. The rating of Muthoot Finance has been determined on the basis of gold loan. Therefore, there cannot be any very good result for AA Plus retail investors.
However, if big investors are able to take the risk, then investing money in NCDs can be a better way for them. According to experts, investors should remember that gold loans can default if there is a big fluctuation in the price of gold. Muthoot Finance Company is a company based entirely on gold loans.
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