L&T Finance NCD 2019- Tranche-II
(i) The L&T Finance limited in Feb-19 has submitted the prospectus to SEBI for raising money by issuing secured redeemable Non -convertible debentures of face value of ₹ 1,000 Indian rupees one thousand) each (“secured NCDs”) and / or unsecured , subordinated, redeemable non – convertible debentures of face value of ₹ 1,000 (Indian rupees one thousand) each (“unsecured NCDs ”) for an amount up to ₹ 5000 Cr (“shelf limit”).
(ii)The 5000 Cr to be raised in different Tranches.
(iii) Tranche I
The Company last month has come up with an 1500 Cr NCD in which issue size was Rs 500 crore, with a greenshoe option of Rs 1,000 crore. The company got a very good response and as NCD is ” first come first serve basis” the issue closed in just 2 days. Last month, the company had raised Rs 2,228.06 crore in the first tranche against a plan to mop up Rs 1,500 crore.
(iv) Tranch-II
Public Issue of Non-Convertible Debentures Of Face Value Of Rs.1000 Each For an amount of Rs. 500 Crore with an option to retain oversubscription up to Rs. 500 Crore Aggregating Up To Rs.1,000 Crore (“Tranche 2 Issue”).
In Tranche-II the company is offering coupon rates for 3, 5 and 8 years between 8.48 to 9.05 which was slightly lower than Tranche-I issue.
Objective of NCD L&T Finance NCD 2019- Tranche-II:
The Objective of raising 5000 Cr from NCDs is:
(i) For the purpose of onward lending, financing, refinancing the existing indebtedness of L&T Finance Limited ( payment of the interest and /or repayment /prepayment of principal of borrowings.
(ii) For General Corporate Expense.
L&T Finance NCD 2019- Tranche-II Details:
| Open Date: | Apr 08 2019 |
| Close Date: | Apr 10 2019 |
| Issue Size: | ₹ 1000 Cr. |
| Face Value: | ₹ 1000 Per NCD |
| Market Lot: | 10 NCD |
| Minimum Order Quantity: | 10 NCD |
| Listing At: | NSE,BSE |
Promoters:
The promoter is L&T Finance Holdings Limited.
Financials:
1. As on 31.03.2018, total Debt on Balance Sheet is 28466 Cr and Equity is 8648 Cr. So Debt/Equity= 3.29.( Reasonable).
2. The Revenue for FY17-18 is at 5245 Cr which is up by 26% as compared to FY16-17.
3. The PAT for FY17-18 is at 332 Cr which is up by 700% as compared to FY16-17.
Credit Rating:
The NCDs proposed to be issued under this Issue have been rated:
(i) ICRA AAA (stable) (pronounced as ICRA triple-A with Stable outlook)for an amount of ₹ 5,00,000 lakhs, by ICRA Limited (“ ICRA ”)
(ii) CARE AAA / Stable (pronounced as CARE triple-A with Stable Outlook) for an amount of ₹ 5,00,000 lakhs, by CARE Ratings Ltd. (“CARE”).
(iii) IND AAA / Stable (pronounced as IND triple-A with Stable outlook) for an amount of ₹ 5,00,000 lakhs by India Ratings and Research Private Limited (“ India Ratings ”) vide their letter dated December 31, 2018.
The rating of NCDs by ICRA, CARE and India Ratings indicate that instruments with this rating are considered to have high est degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.
Interest Rates:
| Series | I | II | III | IV | V | VI | VII |
| Frequency of Interest payment | Annual | Cumulative | Annual | Monthly | Cumulative | Annual | Monthly |
| Tenure (In Years) | 3 | 3 | 5 | 5 | 5 | 8 | 8 |
| Nature | Secured | Secured | Secured | Secured | Secured | Secured | Secured |
| Coupon (% p.a) - Category I &II | 8.70% | NA | 8.80% | 8.48% | NA | 8.85% | 8.52% |
| Coupon (% p.a) - Category III, and IV | 8.90% | NA | 9.00% | 8.66% | NA | 9.05% | 8.70% |
| Effective Yield (% p.a) - Category I | 8.69% | 8.70% | 8.79% | 8.81% | 8.80% | 8.84% | 8.86% |
| Effective Yield (% p.a) - Category II,III, IV | 8.89% | 8.90% | 8.99% | 9.00% | 9.00% | 9.04% | 9.05% |
Post Tax returns:
(i) Sold after Maturity :
The interest earned through NCDs will be added to the total income and will be taxed at 5%, 20%, and 30% respectively depending upon the income slab of an Individuals.
(ii) Sold Before Maturity:
If you decide to sell the NCDs on the stock exchange, capital gains can also arise. If NCDs are sold within a period of 12 months from the date of allotment, short term capital gains/loss (STCG) will arise and if you decide to sell NCDs after a period of 12 months, the resulting gain or loss is called long term capital gains/loss (LTCG)
Recommendation:
Review and Recommendation of L&T Finance Limited NCD- Tranche-II by InvestorZone team: 5/10
IZ Review
(i) The company has good fundamentals.
(ii) The company has a good pedigree of management.
(iii) The investors who are looking for something more than FD can surely have a look in this NCD.
(iv) The Tranche-I NCD which came last month got an excellent response.
1-5: Fair
5-7: Good
7-10: Excellent
Lead Manager of L&T Finance NCD 2019- Tranche-II:
- A. K. Capital Services Limited
- Axis Bank Limited
- Edelweiss Capital Limited
- Trust Investment Advisors Private Limited
Registrar of L&T Finance NCD 2019- Tranche-II:
- Link Intime India Private Limited
Discussion on L&T Finance NCD 2019- Tranche-II:
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Listing Circular:
https://d2un9pqbzgw43g.cloudfront.net/main/CML40767.pdf
*L&T Finance Ltd. NCD – Basis of allotment update*
Allotment will be done as per below Subscriptions Day 1:
*QIB: 2.641520*
*Corporate: 1.081940*
*HNI: 4.413999*
*Retail: 2.675220*
L&T Finance on Tuesday said it has raised Rs3,238.48 crore through non-convertible debentures.
The company raised a total of ₹3,238.48 crore worth of subscriptions, which is 6.48 times of the base issue size of ₹500 crore.
The issue was oversubscribed on the first day of tranche 2 issue on 8 April, it said in a release.
The wholly owned subsidiary of L&T Finance Holdings said these non-convertible debentures (NCDs) have been rated stable by Icra, CARE and India Ratings.
The first tranche of the NCD was oversubscribed on day one 6 March 2019 when the company had raised ₹2,228.06 crore, around 4.45 times of the base issue ( ₹500 crore).
Any basis of allotment out?
One more thing that has gone unnoticed by many is the grt tax benefit bonds offer over bond funds.
Whereas bond funds get long term status after 3 yrs and are indexable, listed bonds get long term status after 12 months but are not indexable.
However the long term capital gain on them is only 10%.
Thus, those who choose not to get interest but opt for the 37 month cumulative or 61 month cumulative period can just paythe capital gain of 10%. thus 8.9% taxable becomes 8% post tax.
On a aaa rated bond, what better post tax yield can one get.
Much superior to tax free bonds.
Add to that, you can try selling them in the stock mkt after one year and still make abt 8%.
There is one caveat to rhe above..and that is one would have to sell these ncd’s in the stock exchange to qualify for capital gains.
The issue has since closed. By the way, the first tranche issued in march 2019 is commanding a 4% premium.
Ofcourse liquidity is not very high.
With oversubscription of more than 6 times overall, and their desire to retain another 500 crores, even then avg ration across categories is thre times. Hence those who applied on day 2 will get poor allotment. Keeping fingers crossed on 1st day applications, maybe abt 50-100% in retail category
Listing gain or discount both are possible.
Retail category fully subscribed.
Listing price in NCD remains same i.e. 1000 or is there any listing gain? (I’m new to NCD investment)
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