9.4% Reliance Home Finance NCD – Dec 2016 – Should you Invest?

Reliance Home Finance has come out with public issue of non-convertible debentures (NCD) offering up to 9.40% interest rate. The issue opens on December 22 and closes on January 7, 2017.

Reliance Home Finance is primarily into financing of home loans along with Wealth Management, Commercial Finance, etc.

Reliance Home Finance NCD – Significant Points:

• Offer Period: December 22 to January 7, 2017
• Annual Interest Rates for Retail Investors: 8.9% to 9.4% 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: 
  • Secured – CARE AA+;Stable by CARE; BWR AA+ by Brickwork
  • Un-secured – CARE AA; by CARE; BWR AA by Brickwork
• NCD Size: Rs 1000 crore with option to retain oversubscription upto Rs 3000 crore
• 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
• NRIs are not eligible to apply

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

Reliance Home Finance NCD – Investment Options:

There are 4 options of investment in Reliance Home Finance NCD.

Reliance Home Finance NCD – Who can Apply?

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

• Category I – Institutional Investors – 30% of the issue is reserved
• Category II – Corporates – 10% of the issue is reserved
• Category III – High Net worth Individuals – 30% of the issue is reserved
• Category IV – Retail Individual Investors – 30%

However NRIs cannot apply for this NCD.

Why you should invest?

1. The first 3 options are secured, which means the above debt is backed by assets of the company
2. The interest rates are 2% higher than your regular Bank FDs
3. No TDS if invested in Demat Form

Also Read: Highest Interest Rate on Recurring Deposits

Why you should not invest?

1. Though the NCDs are listed on exchange but selling them at the right price is difficult due to lack of liquidity. So invest only if you want to hold till maturity.

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 (only first 3 options which are secured)
2. Avoid the 4th option which is unsecured and has a lower credit orating of “AA” only
3. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
4. 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 early as most NCD issues are over-subscribed before the end date.