Edelweiss Broking has announced the public issue of its secured redeemable non-convertible debentures (NCDs) of face value of Rs.1,000 each, aggregating up to Rs 150 crore (base issue). They have also retained an option of over-subscription of Rs 150 core, in total aggregating up to Rs 300 crore, Edelweiss Broking said in a press release.
Equirus Capital Private Limited and Edelweiss Financial Services are the lead managers to this issue.
Up to 90 per cent of the net proceeds of the issue will be used for working capital purposes.
The remaining net proceeds are anticipated to be used for general corporate purposes, subject to such utilisation adhering to the Securities and Exchange Board of India (Sebi), and not exceeding 10 per cent of the amount raised in the issue.
“The NCDs carry fixed coupons ranging from 8.75-9.95 per cent per annum and have tenor of 24, 36, 60 and 120 months available with various interest payment options like monthly, annual and cumulative,” Edelweiss said in the statement.
On the deemed day of allotment, the investors in the proposed issue, who are also the holders of NCDs or bonds previously issued by the company and/or ECL Finance Limited, Edelweiss Financial Services Limited, Edelweiss Housing Finance Limited, Edelweiss Retail Finance Limited, and/or are equity shareholder(s) of Edelweiss Financial Services Limited, or as the case may be, will be capped with an additional incentive at 0.20 per cent per annum.
Risk And Rating
The NCDs that are being proposed for issuance under this Issue have been given the CRISIL AA- and ACUITE AA rating. CRISIL has given AA-/Negative outlook, which 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. Considering the weak market conditions on the back of the global sell-off in equity, there will be pressure on its earnings. In that scenario, the space in which the company works is likely to get downward revision from rating agencies. This does not bode well for investors.
Liquidity Through Listing
The NCDs will be listed on BSE Limited to provide liquidity to the investors. Do note that the listing definitely provides investors with the required liquidity option when in need of funds, but considering the lower liquidity, they will be traded at a discounted price.
The NCD offers a decent coupon rate if you compare it with your bank fixed deposit, which gives a return of 6.10-6.50 per cent. However, it carries the default risk. Considering the current inflationary trend, the interest rate is likely to move up on your bank fixed deposits. In such a scenario, conservative investors should avoid this NCD. If you are willing to take some risk for little higher returns, you can invest some part of your capital to boost your overall fixed income returns.