is offering NCD’s that are opening for subscription from Dec 13th,
2018. These NCD’s offer a yield of up to 10.64% per year. In this blog post let
us see what is NCD’s, how are the taxations, is it worth investing in this ECL
Finance NCD and etc.,
What is a
debenture and what are the types of debentures?
a security instrument used primarily by corporates to raise money for a fixed
interest rate. Debentures can either be convertible to shares after a certain
period or non-convertible. The main advantage of debentures is they are win-win
in terms of interest rate as the interest rate in debentures are lower than
bank loan interest rate for companies at the same time for investors they offer
higher interest rates than fixed deposits.
convertible and Non – Convertible debentures?
Convertible Debentures: Convertible debentures are instruments that can be converted
to shares after a pre-determined period. These are attractive for investors and
company because, they can be converted to shares and the interest rate offered
is typically lower than an NCD.
Non – convertible debentures – NCD: Unlike CD’s (Convertible debentures) will be like
fixed term deposits where they cannot be converted to shares instead the
company has to pay the investors with principal and interest (if not paid
earlier) at the end of term. Since these are non-convertible they carry higher
interest rates than convertible debenture.
secured and Unsecured NCD’s?
NCD’s are typically classified into 2 type.
Secured NCD’s: Secured NCD’s are backed by company’s assets to fulfil the demands (Principal and interest) of the investors. Hence even if company is bankrupt the investors’ money can be recovered through sale of these assets. This ECL NCD is a secured NCD.
Unsecured NCD’s: These NCD’s don’t have any backing. If a company gets bankrupted only the remaining money after paying secured NCD’s will be paid to unsecured NCD investors after the sales of assets.
NCD taxation is based on how you sell and accounting method that you follow.
LTCG If you hold the NCD for more than a year and make a gain by selling it, it will be taxed under long term capital gain and taxed at 10% without indexation.
STCG If you hold the NCD for less than a
year and make a gain by selling it, it will be taxed under short term capital
gain and taxed at your income tax slab slab.
Interest will be taxable as and when the interest is received.
Interest income on NCD will be taxable as and when interest
is accrued and due.
This income from interest will be shown as income from other
sources in your IT filings.
Now let us review the ECL NCD.
Edelweiss NCD Issue
13th December, 2018
11th January, 2019
Intime India Pvt Limited
1,000 per NCD
1,000 per NCD
Tranche I Issue Size
by CRISIL and ICRA
Effective Yield (Per Annum) for Edelweiss NCD:
offers a minimum return of 10.2% which is higher than bank FD interest by at
least 3% on an average. However, this instrument carries a little higher risk
comparing to bank interest rate.
rated as AA stable. Which is the 2nd highest rating indicating the default
risk is comparatively lower. However, this
rating might change in future. Hence we cannot rely on the rating 100% and its
indication of credit risk at present.
NCD’s can be
redeemed only after the predetermined period. IF you want to redeem early you
should sell them in open market. This NCD would be listed in BSE exchange. However, in case of Bank FD’s you can redeem
it at any time.
Verdict: One can park in some part of your
bank FD portfolio in this as it offers best interest rate in debt category. However,
you should not be putting all your money in this as there is a chance of
How to buy?
can be held only in demat format. Hence you need a demat account to subscribe
this issue. Use ASBA facility in your
bank account to subscribe to this issue or contact your broker.
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