No return big enough in NCD season; Indiabulls, NTPC offers fly off the shelf

NEW DELHI: With the equity market going topsy-turvy, some investors are turning to relatively safer options like NCDs, which are also offering handsome returns. That’s the message one get from the performance of NTPC and Indiabulls Housing issues in two days.

Indiabulls Housing, which had placed Rs 7,180 crore worth of NCDs since July 1, kickstarted a Rs 3,500 crore issue on Thursday. The issue got overwhelming response, with the NCD offering getting oversubscribed by 117 times on BSE within the first hour of bidding process. The issue received bids amounting Rs 4,100 crore against the base of Rs 3,500.

The NBFC is offering annual yields ranging from 8.55 per cent to 9.15 per cent, depending upon the nature and tenure of the offering. One can bid for a minimum of 10 NCDs worth Rs 10,000 of 3-year, 5-year and 10-year secured NCDs while the tenure will be 10 years for unsecured NCDs.

“The public issue of NCDs will help us further diversify our borrowings, reduce cost of funds and help us take advantage of the growth opportunities we foresee in the sector,” Gagan Banga, Vice-Chairman & MD, Indiabulls Housing Finance, said last week. The issue will close on August 23.

On Thursday, NTPC received bids worth Rs 1,495 crore for its taxable secured non- convertible debenture issue of Rs 500 crore. The bid book was closed within 15 minutes, with the issue getting oversubscribed three times, the company said.

The ‘AAA’-rated issue of the power generator fetched Rs 670 crore and had a coupon of 7.47 per cent per annum.

"The bid book was closed within 15 minutes flat with the issue getting oversubscribed three times. Bids amounting to Rs 1,495 crore were received from 15 participants against issue size of Rs 500 crore with green shoe option having bullet maturity of 10 years," the NTPC statement said.

Kosamattam Finance’s NCD issue, which opened on August 29, will close on September 27. The company intends to raise Rs 100 crore via the issue with an option to double the subscription to Rs 200 crore.
The company is offering a coupon rate ranging from 9.75 per cent and 11 per cent for secured and unsecured papers. The issue has been subscribed 1.78 times so far on BSE.

SREI Infrastructure Finance’s Rs 1,000 crore issue will close on September 28. This issue has been subscribed 70 per cent on BSE and 9 per cent on NSE so far.

Dewan Housing Finance Corporation came out with an NCD issue in August and Edelweiss Housing Finance in July, BSE data showed.

Non-convertible debentures are used by companies as tools to raise long-term funds through public issues. To compensate for non-convertibility, lenders usually give a higher rate of return compared with convertible debentures.

The secured or unsecured NCDs generally offer coupon rates of 8-12 per cent, with the latter offering higher returns for higher associated risks. Interest income on these investments is taxable.