10.46% Edelweiss Financial Services NCD to open tomorrow: Should you bet?
The NCDs carry CRISIL A+/Stable and ICRA A+ (rating watch with negative implication). This rating by ICRA points to a situation wherein the rating agency may be forced to downgrade the company's credit rating soon.
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For the conservative investor class who can afford some risk with a higher yield, Edelweiss Financial Services will be issuing non-convertible debentures (NCDs).
The company, as per the prospectus, will issue 25 lakh secured, redeemable NCDs carrying a face value of Rs 1,000 per bond for a base amount of Rs 125 crore with a green shoe option of an additional Rs 125 crore. The investment option will run for subscription between January 9 and January 22.
Should you bet on the offer? Here is a low-down
Rating:
The NCDs carry CRISIL A+/Stable and ICRA A+ (rating watch with negative implication). This rating by ICRA points to a situation wherein the rating agency may be forced to downgrade the company's credit rating soon.
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Objective:
At least 75 per cent of the funds raised will be deployed for repayment or prepayment of existing borrowings, with the balance meant for general corporate purposes not exceeding 25 per cent of the raised amount.
Return:
The product will come in 10 series with fixed coupons and tenures ranging from 24 to 120 months.
Should you invest in the offering?
While the NCD issue offers an enticing yield, it comes with the inherent risk of the financing industry. The note in the NCD prospectus highlighted that "the financing industry is becoming increasingly competitive, which creates significant pricing pressures for us to retain existing customers and solicit new business. Our growth will depend on our ability to compete effectively in this environment."
Hence, investors who have a risk appetite may consider the issue.
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