10.5% JM Financial Products Ltd NCD – Apr’19 – Should you Invest?

JM Financial Limited has come out with public issue of non-convertible debentures (NCD) offering up to 10.5% interest rate and opens for subscription on April 22, 2019.

JM Financial Products Ltd is a “Systemically Important Non – Deposit Taking NBFC” registered with the Reserve Bank of India and operates as the flagship company under the “JM Financial” brand. It is focused on offering a broad suite of secured and unsecured loan products which are customized to suit the needs of the corporates, SMEs and individuals.

JM Financial NCD – Significant Points:

• Offer Period: April 22 to May 21, 2019
• Annual Interest Rates for Retail Investors: 9.9% to 10.5% 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: “[ICRA] AA by ICRA” and “CRISIL AA/STABLE” by CRISIL
• NCD Size: Rs. 200 Crores with an option to Retain Over-subscription Up to Rs 1000 crore
• Allotment: First Come First Serve
• Listing: Bonds would be listed on BSE and will entail capital gains tax on exit through secondary market

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

JM Financial NCD – Investment Options:

There are 6 options of investment in JM Financial NCD.

Call may be applicable in Series III and IV anytime after 24 months from Deemed Date of Allotment and in Series V and VI anytime after 36 months from Deemed Date of Allotment. This means that JM Financial has the option to buyback after 24/36 months. 

Click to Know about latest NCD issues

JM Financial NCD – Who can Apply?

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

1. Category I – Institutional Investors – 10% of the issue is reserved
2. Category II – Non-Institutional Investors, Corporates – 10% of the issue is reserved
3. Category III – HNIs – 40% of the issue is reserved
4. Category IV – Retail Individual Investors – 40% of the issue is reserved

However NRIs cannot apply for this NCD.

Also Read: 25 Tax Free Incomes & Investments in India

Why you should invest?

1. AA Credit rating means less likely hood of credit default
2. The NCD is secured, which means the above debt is backed by assets of the company
3. The interest rates are 2% higher than your regular Bank FDs
4. No TDS if invested in Demat Form

Why you should not invest?

1. There are some concerns regarding corporate governance. 
2. There are NCDs available in secondary market which have higher yields with similar rating. The problem is low liquidity and hence is difficult to buy in large numbers.
3. The present Tax Free Bonds are offering yields up to 6.5% in secondary market, which is better investment for People in highest tax bracket.

How to Apply?

You can apply online by 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 company site or 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
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 are low and hence you would get lower than market value