JM Financial Credit Solutions non convertible debentureThere are new Non-Convertible Debentures (NCDs) coming up almost every month in the market. When you hear an NCD is giving 10% interest rate at a time when bank FDs are offering 7-8%, it is understandable why NCDs seem an attractive option. Many are desperately looking for high fixed return products, especially the senior citizens and pensioners.

JM Financial Credit Solutions Limited is offering secured, rated, listed, redeemable NCDs with an attractive interest rate of 9.67% to 10.25% per annum. Should you consider these NCDs? Are they worthy of investment? Understanding the business that pays you the interest is more important than just focussing on the interest rate. This is why RupeeIQ believes in analysing the business. Read on.

NCD issue details

Let us first tell you about the issue details.

JM Financial Credit Solutions is the NBFC arm of the JM Financial Group. The company provides, what it calls, ‘integrated financial solutions’ to real estate developers.

The NCD issue, which opens on November 20, is scheduled to close on December 20, with an option for early closure.

This the second time in a few months that JM Financial Credit Solutions is coming to the market to raise funds from investors. In Tranche 1, the company had raised Rs 750 crore. This was in the month of June 2018.

The latest offering consists of a public issue of secured, rated, listed, redeemable, non-convertible debentures of face value of Rs. 1,000 each (secured NCDs) with a Base Issue size of Rs 250 crore with an option to retain oversubscription up to Rs 1,000 crore, aggregating up to Rs 1,250 crore.

Ratings to this issue – ICRA and India Ratings have given ratings to the latest NCD issue that indicate ‘High degree of safety’ regarding timely servicing of financial obligations. The secured NCDs have been rated [ICRA] AA/Stable by ICRA. The same has been rated IND AA/Stable by India Ratings.

Issue structure and interest rates offered – The NCD issue comes in six options.

In Option 1, the interest will be paid on an annual basis at a rate of 10.00% p.a.; and the tenure is 42 months. The effective yield (per annum) comes to 10.02%.

In Option 2, the interest will be paid on a cumulative basis and the tenure is 42 months. The redemption amount per NCD is Rs 1,396.15. The effective yield (per annum) is 10.00%.

In Option 3, the interest will be paid on an annual basis at a rate of 10.10% p.a. and the tenure is 60 months. The effective yield (per annum) is 10.09%.

In Option 4, the interest will be paid on a monthly basis at a rate of 9.67% p.a. and the tenure is 60 months. The effective yield (per annum) is 10.10%.

In Option 5, the interest will be paid on an annual basis at a rate of 10.25% p.a. and the tenure is 120 months. The effective yield (per annum) is 10.24%.

In Option 6, the interest will be paid on a monthly basis at a rate of 9.81% p.a. and the tenure is 120 months. The effective yield (per annum) is 10.25%.

Retail investors – The Category IV is for retail individual investors. They are defined as Resident Indian individuals and HUFs through the Karta applying for an amount aggregating for an amount up to and including Rs 10 lakh, across all options/series of secured NCDs.

The Category III is for High Net-worth Individuals or HNIs. These investors are Resident Indian individuals and HUFs through the Karta applying for an amount above Rs 10 lakh, across all Options/Series of Secured NCDs].

Minimum application amount – The minimum application amount is Rs 10,000 collectively across all options/series on NCDs and in multiples of One (1) NCD of a face value of Rs 1,000 each after the minimum application.

Allotment – The allotment is on a first-come-first-serve basis (on the date of oversubscription the allotments will be made to the applicants on a proportionate basis). Investors have to apply for NCDs only in dematerialised form.

Listing of NCDs – The secured NCDs are proposed to be listed on BSE Limited, which will be the designated stock exchange.

Company details and business

The company is a Systemically Important Non–Deposit taking Non–Banking Financial Company forming part of the JM Financial group. It is a wholesale finance NBFC and provides ‘integrated financial solutions’ to real estate developers with a focus on residential project financing such as funding real estate developers at various stages in the life cycle of a real estate project. It was earlier known as FICS Consultancy Services Ltd and got its present name in March 2015.

The equity shares of this company were previously listed on BSE. With effect from April 18, 2013, the trading of equity shares of the company was discontinued, pursuant to the company having complied with the formalities for voluntary delisting of its equity shares.

The company commenced lending to real estate developers in 2014 and its clients are located in Mumbai, Pune, Bengaluru, Chennai, Hyderabad, NCR and Kolkata. For fiscal 2018, its loan book stood at Rs 7,338.8 crore as compared to Rs 5,658.1 crore as of fiscal 2017.

The company provides secured and unsecured lending to the real estate developers. Its product portfolio consists of Project finance; Loans against property; Loans against shares; Project at early stage loans; and Loans against land.

Company owners – JM Financial Credit Solutions Limited is controlled by a few shareholders. But, the company’s biggest stakes are owned by JM Financial Ltd. and INH Mauritius (Vikram Pandit).

Board of directors – The current board of directors of the company consists of Vikram Pandit as Non executive Chairman, Hariharan Aiyar as Non executive Vice Chairman, V P Shetty as Non executive Director, Dipti Neelakantan as Non executive Director, Darius E Udwadia and Anup Shah as Independent Directors.

Important business details – JM Financial Credit Solutions is exposed to real estate. Its portfolio concentration remains high given the focus on wholesale lending. Project finance is 48% of loan book, followed by 18% in Loan Against Property, 11-12% each in project loans at early stage of projects and loans against land. If there is any sharp deterioration in asset quality in case of any slippages, that could be bad. Do note that deterioration in asset quality can happen owing to lumpy slippages in the real estate segment. As on September 30, the gross non-performing assets of the company stood at 0.9%.

As of September 30, 2018, the company had 85 borrower groups in this business, and the average ticket size of advances per borrower group was Rs 102.8 crore.

In terms of geographical exposure, Mumbai accounts for 38.8%, Bengaluru 22.7%, Chennai 13.1%, Pune 8.2%, NCR 7.9%, Kolkata 5.0% and Hyderabad 3.5%.


1. Strong brand name of the JM group
2. Ramp-up in lending business
3. Healthy financial flexibility
4. Decline in cost of borrowing


1. Decline in net interest margin
2. Concentration of loans to Mumbai and Bengaluru
3. Wholesale lending business remains susceptible to the performance of the real estate sector
4. Large ticket size of loans

RupeeIQ take – The attraction to 10% interest rate offered by the issue is understandable. But do remember that NCDs are not like typical Bank FDs. Here you are lending money to a corporate and not to a bank. If you are game to take some risk, then you could allocate a maximum 1% of your debt portfolio to one NCD issuer. At an overall level, NCDs should be capped at 10% of your debt portfolio component. Diversify your risk in different NCDs rather than sticking all money in a single issue even it offers 10%+ rates. Being conservative is important for debt investors.

Disclaimer: The article is only for informational purposes. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on