LT Finance debenturesL&T Finance Limited, a leading systemically important non-banking financial services company, has come out with a public issue of secured redeemable non-convertible debentures of the face value of Rs 1,000 each. The Tranche 1 Issue offers various options for subscription and the interest of 8.75% to 9.35% per annum. The Tranche 1 Issue has opened on March 6, 2019 and is slated for closure on March 20, 2019, with an option of early closure or extension.

Triple-A rated NCDs, like these from L&T Finance, usually have the highest degree of safety regarding timely servicing of financial obligations. Such instruments also carry the lowest credit risk. The financial services business is among the high growth and profitability businesses in the L&T group. Plus, the diversified business nature of L&T Finance, adequate liquidity, and reasonable asset quality are positives. There are no immediate negatives, which is also a plus. RupeeIQ decodes the NCD issue so that you can make an informed decision.

NCD issue details

The Tranche 1 issue of L&T Finance NCDs includes a base issue size for an amount of Rs 500 crore with an option to retain oversubscription up to Rs 1,000 crore. So, theoretically, the company may mop up to Rs 1,500 crore.

The offer is rated as [ICRA] AAA / Stable (pronounced as ICRA triple A with Stable outlook), CARE AAA / Stable (pronounced as CARE triple A with Stable Outlook), IND AAA / Stable (pronounced as IND triple A with Stable outlook), as per L&T Finance.

Post allotment, the secured NCDs will be listed on BSE and NSE.

The secured NCDs, bearing a fixed rate of interest, are being offered under six different series. Check out the graphic below.

LT Finance NCD

Use of NCD money

As per L&T Finance, the net proceeds of the issue will be utilised for the purpose of onward lending, financing, refinancing the existing indebtedness of the company – [payment of the interest and/or repayment /prepayment of principal of borrowings] (up to 75%) – and the rest (up to 25%) for general corporate purpose.

Investment bankers

The lead managers to the issue are Edelweiss Financial Services Ltd., A K Capital Services Ltd., Axis Capital Ltd. and Trust Investment Advisors Pvt. Ltd.

Catalyst Trusteeship Ltd. is the Debenture Trustee and Link Intime India Pvt. Ltd. is the registrar to the issue.

About the company and business

L&T Finance, erstwhile Family Credit Ltd, is a part of the larger L&T group which is one of the leading business conglomerates in India.

L&T Finance’s operations are spread throughout India and it has 223 branches in 218 cities across 21 states and 3 union territories, as of December 31, 2018. In addition, for its microloans business, it has 1,181 meeting centres covering 274 districts across 14 states in India, as of December 31, 2018.

L&T Finance is the largest subsidiary (wholly owned) of L&T Finance Holdings Ltd. L&T Finance houses a lot of rural business such as microloans, and tractor and two-wheeler loans. In addition, it has real estate finance (16% of the book), as per India Ratings. Wholesale finance including infrastructure and structured corporate finance (total 31%).

NBFCs often have asset-liability mismatches which hurt them. In terms of asset liability management, L&T Finance’s short-term assets are in excess of short-term liabilities. Also, L&T Finance has access to L&T Finance Holdings’ liquidity and L&T Group support.

The company enjoys moderate asset quality. While the asset quality of the rural portfolio is dependent on microloans, the only chink in the armoury is the real estate portfolio. ICRA Ratings has pointed out that recently, there has been some rise in delinquencies in the micro-loans portfolio of the company in a certain region, but the company has adequately provided for the same and thus the overall impact on asset quality indicators is expected to be limited.

RupeeIQ Take – The ratings of L&T Finance NCDs (previous offerings) have not changed at least since March 2018. The company appears to be the primary vehicle for retail financing and also provides non-infrastructure related financing to corporates. The company’s moderate profitability indicators are not a cause of worry, because L&T Group’s profits at a consolidated level have also been moderate over the past five years. Overall, we feel this is a safe issue for investors. Safety is far more important than yield or interest when investors are venturing beyond ultra-safe bank FDs. We feel L&T Finance NCDs can be considered for investment by retail investors looking to diversify their debt allocation beyond traditional options.

Disclaimer – Please note that 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