9.50% Mahindra Financial Services NCD – Jan’19 – Should you Invest?

Mahindra & Mahindra Financial Services Ltd, a leading rural non-banking financial company has come out with public issue of non-convertible debentures (NCD) offering up to 9.50% interest rate. The issue opens on January 4, 2019 and closes on January 25, 2019.

Mahindra & Mahindra Financial Services NCD – Significant Points:

• Offer Period: January 4, 2019 to January 25, 2019
• Annual Interest Rates for Retail Investors: 9.05% to 9.50% 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: ‘IND AAA’ India Ratings and Research and ‘CARE AAA’ by CARE
• NCD Size: Rs 500 crore with option to retain over-subscription upto Rs 3500 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

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

Mahindra & Mahindra Financial Services NCD – Investment Options:

There are 4 options of investment in Mahindra & Mahindra Financial Services NCD.

Company shall allocate and allot Series I NCDs wherein the Applicants have not indicated their choice of the relevant NCD Series. Also Series I to III are secured while Series IV is Unsecured.

Also Read: 25 Tax Free Incomes & Investments in India

Mahindra Financial Services NCD – Who can Apply?

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

• Category I – QIB Investors – 20% of the issue is reserved
• Category II – Corporate Investors – 20% of the issue is reserved
• Category III – HNIs Investors – 30% of the issue is reserved
• Category IV – Retail Individual Investors including HUFs – 30% of the issue is reserved

NRIs cannot apply for this NCD.

Why you should invest?

1. AAA Credit rating means very less likely hood of credit default
2. Part of well known conglomerate – Mahindra & Mahindra
3. The interest rates are 2% 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. 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.
3. You can also invest in high rated company fixed deposits
4. Series IV NCD is Unsecured which means it’s not backed by any company asset and in case company shuts down you would be last in queue of lenders to receive money

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

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