Wealth advisors positive on Tata Capital’s NCD

Wealth managers recommend investors subscribe to the NCD issue of Tata Capital given the strong management, good quality portfolio, AAA rating and high interest rate.

“High spread over government securities and strong rating make this a good investment choice for all investors,” said Alok Agarwala, head, research and advisory, Bajaj Capital.

Agarwala said that typically, the spread between a government security and AAA rated company is 70-80bps. However, the NCDs on offer give investors an opportunity to earn a spread of 200 bps, which is lucrative. This is because a 5-year government security offers 6.35-6.5 per cent, while a Tata Capital NCD offers rates between 8.45 and 8.85 per cent.


Wealth managers pointed out that NCDs score over fixed deposits as there is no tax deducted at source and in terms of liquidity by way of being listed on the stock exchange. In the Tata Capital NCDs, investors have the option to choose between tenures of 3-, 5-, 8- and 10-year options.

While the 10-year option is unsecured, all the other tenure NCDs are secured and interest on these NCDs will be paid annually. Wealth managers ask conservative investors to opt for secured NCDs and choose a tenure based on their needs and cash flows.

The offer opens on August 13 and closes on August 23, with an option to close early in case of full subscription. The NCDs proposed to be issued under this tranche II have been rated "CRISIL AAA / Stable" by CRISIL and have been rated "CARE AAA; Stable" by CARE Ratings. Investors can apply for a minimum of 10 bonds with investment of Rs 10,000.

The base issue size of this tranche II is Rs 500 crore, with an option to retain oversubscription of up to Rs 3,626 crore. Out of the Rs 4,126 crore, Rs 2,997.9 crore is secured and Rs 1,128.1 crore unsecured.