First Leasing Limited plans to raise Rs 50 cr through NCDs

First Leasing Limited is planning to raise up to Rs 50 crore through private placement of unsecured redeemable non convertible debentures (NCD's). The company, headquartered in Chennai, is a deposit-taking asset finance company, primarily engaged in the business of leasing, hire purchase, loans, etc.

The product

Each NCD has a face value of Rs 1 lakh. Investors can make an application for 1 NCD. The NCDs have a seven year tenure and the interest rate payable is 12.1% annually. Redemption is at par at the end of seven years. The NCD's have a BWR AA rating by Brickworks and CARE AA- by CARE.

Why to invest

The coupon rate of 12.1% is attractive given the fact that bank fixed deposits pay you between 9-10%. The company is profit making and dividend paying. It made a profit of Rs 32 crore for the year ended March 2012 and paid a dividend of Rs 1.8 per share.

Why not to invest

Being an NBFC, the company carries higher risk than bank deposits. Though the NCDs will be listed on the wholesale debt market (WDM) segment of the BSE, they will be illiquid due to the low issue size and higher face value.