Shortly on the heels of the DHFL NCD issue, JM Financial Credit Solutions Ltd has announced an issue of non-convertible debentures (NCDs) of rates ranging from 9.11% to 9.75% depending on the tenure you select. The high rates represent another jump in interest rates in India.
JM Credit Solutions, an NBFC (Non-banking finance company), is part of the JM Financial Group which also has JM Mutual Fund under its umbrella.
Banks such as HDFC and SBI hiked their deposit rates in April. Bond yields (the effective rate on government bonds) have also been rising. The 10-year bond yield has shot up from 6.4% in August 2017 to 7.85% at present.
The NCDs will be open for subscription from 28th May 2018 to 20th June 2018. The minimum subscription amount is Rs 10,000. Above this amount, you can apply in multiples of Rs 1,000. The base issue is Rs 300 crore with an option to accept oversubscription of another Rs 450 crore. The upper limit of this and other tranches of the NCD combined is Rs 2,000 crore. NRIs will not be eligible to apply for the NCD.
The company will use 75% of the proceeds to pay off its existing borrowings and the balance 25% for general corporate purposes. The NCDs have been rated AA/Stable by ICRA and India Ratings.
The rates and effective yields on the NCD are as follows for different tenures:
|Tenure||38 months||38 months||5 years||5 years||10 years||10 years|
|All categories (%)||9.25||N/A||9.5||9.11||9.75||9.34%|
|Effective Yield per annum (%)||9.26||9.24||9.49||9.49||9.74||9.74|
Interest on application money at 8% on allotment and 5% on refund
NCD interest is taxed at your slab rate which could be as high as 30%. However, TDS is not deducted on NCDs held in demat form.
How to apply
You can download the application form here and apply through one of the lead brokers listed on the page.