High yielding ‘AAA’ NCDs draw big inflows as banks cut rates

Mumbai: Investors have put in Rs 3,000 crore until August 23 into bonds of non-bank lenders, taking advantage of the higher yields offered by these borrowers after high-street lenders slashed interest rates on retail deposits.

The highest amount of Rs 2,235 crore went into Tata Capital’s non-convertible debentures (NCD) that offered interest rates up to 8.85%, and were AAA-rated.

“With banks lowering rates, investors locked in money into high-rated NCDs, with strong brand names,” said Vikram Dalal, managing director, Synergee Capital.

NCD issues of Shriram City Union Finance and SREI Infrastructure Finance opened on August 21.

Distributors say that in a falling rate environment, where banks are now offering about 6.5-7%, investors find AAA-rated companies, like Tata Capital, offering 8.5-8.85%, attractive options.

“Lucrative interest rates from NBFCs (up to 10.5%), falling bank deposit rates, no tax deduction at source (TDS) and a weak stock market with uncertainty on corporate earnings were some of the reasons for investors to prefer NCDs,” said Dalal.