9.05% L&T Finance NCD – Apr’19 (Tranche II) – Should you Invest?

L&T Finance Limited is one of the leading private non-banking financial services companies in India and part of the larger conglomerate L&T Group has come out with public issue of non-convertible debentures (NCD) offering up to 9.05% interest rate (Tranche II). The issue would open on April 8, 2019. Its primary financing business segments are rural, wholesale and housing.

L&T Finance NCD – Significant Points:

• Offer Period: April 8 to 18, 2019
• Annual Interest Rates for Retail Investors: 8.90% to 9.05% 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] AAA (Stable)”, “CARE AAA/Stable” and IND AAA / Stable
• NCD Size: Rs. 500 Crores with an option to Retain Over-subscription Up to Rs 1,000 crore
• Allotment: First Come First Serve
• Listing: Bonds would be listed on BSE & NSE and will entail capital gains tax on exit through secondary market

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L&T Finance NCD – Investment Options:

There are 7 options of investment in L&T Finance NCD.

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 – High Networth Individuals (HNIs) – 35% of the issue is reserved
4. Category IV – Retail Individual Investors – 45% of the issue is reserved

High Networth Individuals are Investors/HUFs applying for an amount aggregating to more than Rs 10 lakhs across all Series of NCDs

However NRIs cannot apply for this NCD.

Also Read: 25 Tax Free Incomes & Investments in India

Why you should invest?

1. AAA Credit rating means very less likely hood of credit default
2. The interest rate seems to be coming down. Hence good idea to lock investment for long term.
3. The NCD is secured, which means the above debt is backed by assets of the company
4. Part of the reputed conglomerate L&T Group
5. The interest rates are 2% higher than your regular Bank FDs
6. No TDS if invested in Demat Form

Why you should not invest?

1. 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.
2. 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.

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
4. If you plan to invest in this issue, do it early as most NCD issues are over-subscribed before the end date.