Listed NCDs
Date of Post: 26/01/17

This is an update to earlier post which focused on some 9% plus opportunities in the Listed Non Convertible Debentures ( Listed NCDs) by reputed companies. Some of the Listed NCDs offer higher interest and can be examined as Banks FD rates have plummeted to low levels. The previous  year has witnessed several Public Issues of  NCDs which were led by has been led by NBFC and Housing Finance companies who desire to bring down their borrowing from banks and in the process also decrease their average cost of funds. 

The effective yield from these NCDs to an investor who purchases these NCDs from secondary market can be evaluated from Yield to Maturity Ratio(YTM). YTM for a bond is the total return, interest plus capital gain, obtained from a bond held till its maturity. It is expressed as a percentage and tells an investor what his return on investment will be if he purchases the bond and holds on to it until the redemption of the bond. It takes into account the accrued interest on the bond, interest payments on future and resulting capital gain or loss depending on whether the purchase price is more or less than the face value of the bond. 

Development Impacting Bond Yields
  • High expectations of a rate cut were built on Reserve Bank’s February 8 policy meeting. shows that the focus has shifted to lowering inflation towards the medium-term target of 4 per cent. Wary of inflation, Reserve Bank of India choose to wait and watch and left repo rate untouched. This has led to arrest in continuous fall of Bond yields and yields have hardened to some extent
  • Many market participants & Institutions now believe that India’s rate cutting cycle has come to an end because growth should gradually bounce back as the economy is remonetised and fighting inflation will become a priority. This view has recently been aired by Nomura as well  in its recent report Click to read the article .
  • In a recent development on 23rd Feb 2017, Sebi has eased the  norms for debt MF investment in housing finance cos. Debt mutual funds can now invest up to 15 percent of their total net assets in housing finance companies against the earlier cap of only up to 10 percent in housing finance companies. This move could slightly compress the good yields enjoyed currently by Housing Finance company bonds. Click for Detailed info
    Information & YTM of some Select  Listed NCDs

    Details of some Listed NCDs (Mostly new issues in past one year)  along with Yield to Maturity  (YTM) Ratio based on closing prices of these bonds on NSE on 23/2/17 is indicated. ( In all these Listed NCDs  interest payment frequency is Annual).

  • As  on23-02-17           
    NCDNSE  CodeBSE CodeCoupon (annual Frequency)YrsRatingFVCMPYTMIssue / LI dateinterest due dateRedemp.  dateyrs Left
    DHFL Tier IDHFL NC9358149.310AAA10001042.169.40%16.8.1616.8.1716.8.269.482
    DHFL Tier IIDHFL NP9358409.257AAA10001037.939.34%
    EHFLEHFLNCD N69357881010AA10001077.359.73%19.7.1619.7.1719.7.269.405
    IBUL HSG FinIBULHSGFIN NE935868,9.1510AAA100010149.51%26.9.1626.9.1726.9.269.595
    RHFLRHPL N69359129.1510AA+1000985.59.56%
    RHFL-usecuredRHPL N8 9359169.415AA+1000988.559.68%
    SREI InfraSREINFRA Y1935898105AA+ BWR100010309.79%
    SREI Eq. Fin Ltd SREIBNPNCD-NL 9359409.755AA+ BWR100098510.39%
    MMFSL Not Listed935752910AAA100010888.65%

    Other than MMFSL(Mahindra & Mahindra Finance Ltd.) NCDs, which ruling at YTM of  8.66, all other NCDs including the AAA rates ones of DHFL (Dewan Housing Finance Ltd.) and India Bull Housing Finance are giving  > 9% p.a. YTM.

    These 9% Plus p.a. Listed NCDs present good opportunities though they are not as safe as bank FD even though AAA rated instruments carry high degree of safety. A small investment in these Listed NCDs can be seen as a means of diversifying one’s investments and also satiate one’s desire for better yield. 

    Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.