Invest or avoid - InCred Financial NCDs with returns up to 10.02% within shorter tenures

Should you invest in InCred Financial NCDs?

NCD offers Interest rate

The latest company to seek debt financing is the NBFC InCred Financial which recently launched the issue of its Non-Convertible Debentures (NCDs). The secured NCDs was launched on 9th January 2023 to attract investors to lend funds to the company for its financial needs. 

The NCD offers a high effective interest rate of 10.02% within shorter investment durations. Is the NCD worth investing in? Let’s assess.

About InCred Financial NCD

The launched NCDs are secured against the company’s assets and are, thus, a safer investment avenue. The details of the NCD are as follows –

  • Each debenture unit carries a face value of Rs.1000. The minimum application is Rs.10,000.
  • The issue will close on 27th January 2023 and be allocated on a first-come, first-serve basis.
  • InCred Financial has made a base issue of NCDs aggregating Rs.175 crores. Moreover, the company has applied to retain Rs.175 crores in oversubscription, bringing the issue size to Rs.350 crores.
  • A minimum of 75% of the funds raised through the issue of the NCDs will be utilized for lending purposes, financing activities, and to repay the existing loans and their interest.
  • The interest rate on these NCDs ranges from 9.45% to 10%, and the effective yield goes up to 10.20%.
  • You can choose interest payments quarterly or annually.
  • The tenure of the issue is 27 months and 39 months. 
  • The debentures carry a CRISIL rating of A+ with a stable outlook.

Here’s a look at the interest rates

interest rates InCred Financial NCD

Related Article- Read this beginner's guide to NCD to understand them better

About InCred Financial Services 

InCred Financial Services was earlier known as KKR India Financial Services. It is a Non-Banking Financial Company (NBFC) that offers a range of loan products for middle and lower-income families. The company’s product bouquet includes education and personal loans.

In January 2022, InCred Financial came out with an issue of NCDs worth Rs.150 crores. The NCDs offered interest rates ranging from 9.25% to 9.65%.

Should you invest in NCDs?

The rating of the NCD is not very high as it is A+ compared to the highest rating of AAA. As such, there’s little risk for investors. CRISIL attributed the low rating to the company’s market position, earning profile and scale of operation. As such, the NCD has a moderate credit risk that you cannot ignore. 

Secondly, experts believe interest rates to rise further in the first half of 2023. As such, the NCD's interest might pale in the future as interest rates are hiked.

Thirdly, there is a liquidity concern as you might not be able to redeem the debentures before maturity.

On the plus side, however, the interest rate being offered is attractive vis-à-vis the tenure of the NCD. The NCD offers high effective rates over shorter durations and can be considered if credit risk can be avoided.

So, assess your investment needs and then make an informed decision. 

Related Article - Here's what you need to know about NCDs before you invest in them


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