Non convertible debentures (NCDs) are fixed income instruments and are generally issued by large companies. It is good to get profit through them. These are somewhat like fixed deposits (FDs), while they can yield up to 8.25 per cent interest on 24 months of investment.
You can get good profit by investing in two companies at this time. Both India Infoline (IIFL) and JM Financial have come out with NCDs. The NCDs of IIFL will close on October 18, while that of JM will close on October 14. By the way, it is to be noted that such investments also carry risk, which completely depends on the market. In such a situation, before investing, one should proceed in this regard only after consulting a financial advisor or expert in this matter.
According to financial advisors, “Investors can invest 10 to 20 per cent of their investments for five years.” JM Financial has kept the investment horizon of 39 months, 60 months and 100 months. It will be given 8.2 percent interest on 60 months and 8.3 percent on 100 months.
On the other hand, IIFL Finance will give 8.25 percent interest on 24 months investment, 8.5 percent on 36 months investment and 8.75 percent on 60 months investment. The good thing is that the interest rate of both these companies is 70 to 80 percent higher than the FDs of banks.
Should you invest?: IIFL Finance has a diversified portfolio of loan products and borrowers. In the last three to four years the company has been able to double its gold loan book since 2019. Its microfinance loans have also grown at a rapid pace. Gold loans are generally secured and hence help in balancing the loan portfolio. As per the details in the prospectus, about 86 per cent of the loan book is secured with adequate collateral.
According to Vikram Dalal, Managing Director, Synergy Capital, “The company is backed by strong financials and sound management which makes the issue attractive.” However, experts also say that invest in them only if you are willing to take some risk. The biggest concern raised by the credit rating agencies in case of IIFL is the relatively young age of its loan book. There has been a huge growth in the loan book in the last three years, which means that the cycle is on and experience is limited.
