9.75% Aadhar Housing Finance NCD – September 2018 – Should you Invest?

Aadhar Housing Finance has come out with latest NCD (non-convertible debentures) offering up to 9.75% interest rate. The issue opens on September 14 and closes on September 28, 2018.

Aadhar housing finance ltd (Aadhar), formerly known as DHFL Vysya Housing Finance Ltd, (Formed With the merger of DHFL Vysya and Aadhar Housing Finance) is one of the largest affordable housing finance companies in India servicing the home financing needs of the low income sections of the society.

Aadhar Housing Finance NCD – Significant Points:

• Offer Period: September 14 to 28, 2018
• Annual Interest Rates for Retail Investors: 9.25% to 9.75% depending on tenure
• Price of each bond: Rs 1,000
• Minimum Investment: 10 Bonds (Rs 10,000)
• Max Investment Limit for Retail Investor: Rs 10 Lakhs
• Credit Rating: “BWR AA+ (SO) Outlook: Stable” and “CARE AA+ (SO)/ Outlook: Stable”
• NCD Size: Issue size is Rs 500 crore (with an option to retain over-subscription amount of up to Rs 1,400 crore more)
• NRIs are NOT eligible to apply to this NCD issue.
• Allotment: First Come First Serve
• Listing: Bonds would be listed on BSE and NSE and will entail capital gains tax on exit through secondary market

Also Read – Know NCD – Investment Tips, TDS and Taxation

Aadhar Housing Finance NCD – Investment Options:

There are 6 options of investment in Aadhar Housing Finance NCD.

Company shall allocate and allot Series II NCDs wherein the Applicants have not indicated their choice of the relevant NCD Series.

The bonds can be purchased in Demat or Physical Form.

Aadhar Housing Finance NCD – Who can Apply?

This issue is open to all Indian residents, HUFs and Institutions.

• Category I – QIB Portion – 20% of the issue is reserved
• Category II – Corporate Portion – 10% of the issue is reserved
• Category II – HNIs – 35% of the issue is reserved
• Category III – Retail Individual Investors including HUFs – 35% of the issue is reserved

However NRIs cannot apply for this NCD.

Why you should invest?

1. The credit rating is AA+ which is good for investment purpose
2. The NCD is secured, which means the above debt is backed by assets of the company
3. The interest rates are 2%-3% higher than your regular Bank FDs
4. No TDS if invested in Demat Form

Also Read: Highest Interest Rate on Recurring Deposits

Why you should not invest?

1. The banks have started increasing interest rates on fixed deposits and hence it may not be good idea to invest for long term (DO not go for 10 year tenure – you might get better opportunities going forward).
2. You can also invest in high rated company fixed deposits or Small Bank Fixed Deposits offering 9%
3. For people in highest tax bracket Tax free bonds are trading at yields of 6.1% to 6.3% – which would turn out to be better and more secure investment
4. Tata Capital Financial Services Ltd NCD & Indiabulls Commercial Credit Ltd. NCD is also open for subscription with better rating but lower interest rate.

How to Apply?

If you have Demat account apply through that or ASBA facility provided by banks. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work

Learn: How to apply for NCD issues using ASBA?

In case you don’t want to do it online, you can download the application form from Financial Institutions and submit to collection centers.

Recommendation:

1. My recommendation is to invest some part of your Fixed Income investment in this NCD Issue  (3 or 5 year tenure bonds only)
2. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
3. Its good idea to remain invested till maturity because liquidity on exchanges is low and hence you would get lower than market value

If you plan to invest in this issue, do it on first day as most NCD issues are over-subscribed within few days of opening.