Edelweiss Housing Finance NCD: Should You Invest In It?

Edelweiss group’s non-deposit taking housing finance company is coming up with a public issue of Secured Redeemable Non-Convertible Debentures (NCDs) of the face value Rs 1,000 each, amounting to Rs 150 crore in the base issue and an option to retain over-subscription up to Rs 150 crore, aggregating to Rs 300 crore. This means that the initial issue size is of Rs  150 crore and if the issue gets oversubscribed, the issue size can be extended to Rs 300 crore. 

Tenure And Coupon rate 

 The issue gives investors an option to choose from among 10 series of NCDs carrying a fixed coupon and with tenures of 24, 36, 60 and 120 months with annual, monthly and cumulative interest options. This means that an investors can choose the tenure and interest payout according to their financial needs. The coupon ranges from 8.50 per cent to 9.70 per cent per annum. The issue offers an additional incentive of up to 0.20 per cent per annum to its existing investors who hold NCDs or bonds previously issued by this company or a group company such as Edelweiss Financial Services, Edelweiss Retail Finance or Edelweiss Finance & Investments. 

According to the company, the major part of the funds (75 per cent) raised through this issue will be used for the purpose of onward lending, financing, and for repayment and prepayment of interest and principal of the company’s existing borrowings.  The balance 25 per cent of the funds will be used for general corporate purposes. 

Risk And Rating 

CRISIL and ACUITE have given the NCD AA-/Negative outlook. This technically means that the issue carries a moderate risk. Here, the negative outlook signifies that the rating of the issue could be downgraded in the future. 

Liquidity Through Listing 

The NCDs will be listed on the BSE to provide liquidity to investors. Remember that while the listing provides you liquidity but considering that it may be low, the NCDs are traded at a discounted price. 

Outlook Money Take 

The NCD offers a decent coupon rate if you compare it with your bank fixed deposit, which offers returns in the range of 6.10-6.50 per cent. However, NCDs carry the default risk. Considering the current inflationary trend, the interest rates are likely to move up on your bank fixed deposits. In such a scenario, conservative investors may avoid the NCD. If you are willing to take some risk for slightly higher returns, you can invest some part of your capital to boost your overall fixed income returns.