Mumbai: Investors with some risk appetite looking to earn more than bank fixed deposits can invest in non-convertible debentures (NCD) of Products and . Given that interest rates are on an uptick, financial planners recommend applying for shorter tenures of up to five years and restrict investments to 10-20% of the fixed income portfolio.
The first tranche of JM Financial, rated AA by
and Care, has a base size of Rs 100 crore with an option to retain oversubscription up to Rs 400 crore, aggregating to Rs 500 crore. The NCDs offer tenures of 39 months, 60 months and 100 months, respectively. While the 39-month NCD comes with a floating interest rate option that pays investors 91 day T-bill plus 315 basis spread, the 60 months and 100 months options offer 8.2% and 8.3%, respectively.
Fairfax-backed IIFL Finance, with an AA rating by Crisil and AA+/negative by Brickwork, offers secured redeemable NCDs aggregating ₹100 crore, with a green-shoe option to retain oversubscription up to ₹900 crore, aggregating to Rs 1,000 crore. The NCD is available in tenors of 24 months, 36 months and 60 months and pays 8.25%, 8.5% and 8.75% respectively.
With fixed deposits from banks paying less, investors are on the lookout for options to earn higher income. NCDs attract them as they pay higher than FD and there is no tax deducted at source (TDS) as they are held in dematerialised form. A typical State Bank of India fixed deposit would pay investors 5.3% for a 3-5 year period, thus allowing investors to earn about 295-345 basis points higher return.
