InCred Financial Services NCD offers up to 10.02% yield; good time to invest?

Public issue of up to Rs 350 crore of secured Non-Convertible Debentures (NCDs) of InCred Financial Services opens today on January 9, 2023 and closes on January 27, 2023, with an option for early closure subject to relevant approvals.  

NCDs are types of debentures that cannot be converted into equity shares at the time of maturity. They are fixed-income instruments which are used to raise long-term capital. NCDs are classified as secured and unsecured. Secured NCDs are preferred over unsecured NCDs at the time of liquidation. However, due to the higher risk of unsecured NCDs, they offer higher interest rates than secured NCDs.

Company Details: InCred Financial Services Limited is a non-deposit-taking NBFC, registered with the Reserve Bank of India. The company caters to lower middle-class to middle-class Indian households for their personal finance needs like education loans, and personal loans. Correspondingly, the company also offers secured and unsecured business loans to small businesses. As on September 30, 2022 the asset under management for the company was Rs 5,05,217.0 lakh and the company was catering to 3,30,059 customers.

Yield: The NCDs offer coupon rates ranging from 9.45 per cent to 10.00 per cent per annum with quarterly and annual interest options. The NCDs have two tenors of 27 months and 39 months. The NCDs are proposed to be listed on BSE Limited and National Stock Exchange of India Limited where BSE is the designated stock exchange. The NCD is of a face value Rs 1,000 each, amounting to Rs 175 crore with an option to retain oversubscription up to Rs 175 crore aggregating to a total of Rs 350 crore . 

Taxability: When held till maturity, the interest earned will be charged to tax as “Income from Other Sources” at the marginal rate. If sold after a year, then it is considered a long-term capital gain, which is taxable at 10 per cent without indexation. If sold within one year, then short-term capital gains tax is applicable according to the tax slab one falls into. 

Credit Rating: The NCDs proposed under the Issue have been rated CRISIL A+/Stable by CRISIL Ratings Limited. The Lead Manager to the Issue is JM Financial Limited.

Proceeds: At least 75 per cent of the funds raised through this issue will be used for the purpose of onward lending, financing, and for repayment of interest and principal of existing borrowings of the Company and the balance is proposed to be utilized for general corporate purposes, subject to such utilization not exceeding 25 per cent of the amount raised in the issue.

Bhupinder Singh, Whole Time Director and Chief Executive Officer, of InCred Financial Services said, “We have firmly established ourselves as a diversified lending NBFC with a business model rooted in cutting edge tech and analytics and a laser-sharp focus on risk metrics reflected in the strength of our asset quality.  This is a consequence of a tried and tested approach to credit risk and collections. We continuously leverage technology and data-science to make lending quick, simple and hassle-free and believe that technology will help to drive continuous reductions in our processing time, thereby improving our efficiency and allowing us to provide better service to our customers. A key component of our growth so far has been the success of our liabilities strategy, and this public issuance of NCDs will play a role in further diversifying and strengthening our borrowing mix”.

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