Mahindra & Mahindra Financial Services Limited scheduling its Secured, Rated, Listed Redeemable Non covertible debentures from January 4, 2019 – Januray 25, 2019 having Base Issue Rs.150 Crore with an option to retain over subscription up to Rs.150 Crore aggregating to overall Issue size of Rs.300 Crores.

Summary Of Issue:

Company Profile: The Company was incorporated in 1991 under the name of Maxi Motors Financial Services Limited as a public limited company under the provisions of the Companies Act 1956. The Company was registered as a deposit-taking NBFC in 1998 and have since established a pan-India presence, spanning 27 states and five union territories through 1,296 offices as of 30 September 2018. It caters to the financing needs of retail customers and small and medium-sized enterprises. The Company primarily focus on providing financing for purchases of auto and utility vehicles, tractors, cars, commercial vehicles and construction equipment, pre-owned vehicles, and others which accounted for 26 %, 18 %, 20 %, 13 %, 23% and 9 % of estimated total value of the assets financed by the Company, respectively, for the financial year 2018. For the half-year ended 30 September 2018, financing for purchases of auto and utility vehicles; tractors; cars; commercial vehicles and construction equipment; and pre-owned vehicles, SME and others accounted for 23%, 18%, 20%, 18% and 21% of estimated total value of the assets financed by the Company. They benefit from their close relationships with dealers and their long-standing relationships with OEMs, which allow them to provide on-site financing at dealerships.

Financial Performance:

Profit Details in Lakhs

Mahindra & Mahindra Financial Services Limited

What to look for in NCDs

• Before investing in NCDs, investors must see if they are secured or unsecured. In secured ones, they are backed by assets. Which means, if the company is unable to fulfil its obligations, the assets of the company will be liquidated to repay investors. On the other hand, unsecured ones are not backed by any assets. So, if the company is in financial trouble, there can be an issue in paying back the bond holders. As a result, unsecured NCDs pay higher coupons than secured ones.
• While companies issue NCDs to raise long-term funds, these debentures cannot be converted into shares or equities. All NCDs issued have to rated and it is always advisable to buy those papers which have highest rating. Ideally, one should invest in NCDs till maturity for higher long-term returns and reduce the re-investment interest rate risk.
• After maturity, the investor gets back the principal invested and the interest accumulated, if one opts for cumulative option. The company gets back its debenture. The listed debentures are treated as long-term capital assets if the non-convertible debentures are held for a period of 12 months. Investors must keep in mind that while NCDs offer good returns, they also carry higher default risks compared to bank or postal deposits. Moreover, they are very liquid unlike these deposits.

Companies do not deduct tax at source (TDS) on the interest earned every year if NCDs are held in demat form. In fact, any security issued by a company in a demat form and is listed on any recognised stock exchange in the country does not come under the TDS ambit. However, one has to declare the interest amount as income from other source at the time of filing tax returns and pay tax accordingly.

Income Tax on NCDs:

Should you Invest:

1. The credit rating is AAA stable  which is good for investment purpose,
2. NCDs are relatively safer assets than Stocks and Mutual Funds but they are riskier than bank FDs and Government bonds. NCD Issuers normally do not default but when things go drastically wrong, they may face problem in paying the investors.
3. NCD Issuers, especially the top business groups(in this case Mahindra & Mahindra), normally do not default but when things go drastically wrong, they may face problem in paying the investors. In such a scenario, secured NCD holders (if any) would be given higher priority than the holders of Subordinated NCDs.
4. Do not invest your entire savings or investible surplus in one NCD issue alone.You may consider other alternative fixed income avenues like Debt oriented Mutual Funds, Hybrid Mutual Funds, Post office MIS scheme, PPF, Post office Senior Citizen Savings Scheme,etc.

Recommendation:

1. My recommendation is to invest some part of your Fixed Income investment in this NCD Issue  (3/ 5/8 year tenure bonds only),
2. You should always have diversified portfolio be it fixed deposit, NCD or equity investment,
3. It will be a good idea to remain invested till maturity because liquidity on exchanges is low and hence you would get lower than market value

NPS tax treatment at maturity has just got much better. Now, the entire permissible lump sum withdrawal (60%) from NPS is exempt from tax.

The government has granted NPS exempt, exempt or exempt or EEE status which means that like PPF (public provident fund) or EPF (employee provident fund) investment at the investment stage, accumulation and withdrawal stage will be tax free

Along with this, the Government announced a few more changes to NPS. NPS Tier II investments will also be eligible for tax benefit under Section 80C.

There is a lot of good news for Government NPS subscribers. Government contribution has gone up. There is a greater flexibility in how they can manage their NPS investments.

Find below four changes which Government has brought in this product:

Conclusion:

By making above changes in the NPS rules, the Government has made strong case for us to relook at NPS from retirement perspective. A Great move for Government Subscribers.
However kindly note, it is a very long-term investment product, so make sure you understand the implications and the working of NPS before opening an account. Estimate the amount of monthly savings required to meet your post-retirement expenses, keeping the inflation and your life expectancy in mind. Diversify across various investments, including mutual funds and NPS, but do not bank entirely on the latter.

Annuities can provide a baseline support to meet household during retired years, but choosing NPS to accumulate a retirement corpus remains a choice which one needs to take now. A corpus created through a mix of mutual funds can still buy you an Immediate Annuity scheme when you are 60, with all your savings at your disposal. 

NHAI is soon coming up with its maiden public issue of taxable bonds for the retail investors. It has already filed its draft shelf prospectus with SEBI on November 16, 2018, so the issue is expected to open in the month of December’2018.

The company is yet to announce the key details of the issue, like launch date, rate of interest, duration of the bonds etc.

Proceeds of the issue will be utilised towards part financing of different projects including Bharatmala Pariyojana as well as other operational, administrative and financial purposes, the draft papers filed with SEBI showed.

Under the Bharatmala Pariyojana, government plans to build 50 new national corridors and connect 550 district centres with national highways, focusing on optimising efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective interventions.

Here you have some of the salient features of the issue:

Size of the Issue – NHAI has decided to raise Rs. 10,000 crore from this issue.

Coupon Rates on Offer – The company is yet to announce the interest rates it is going to offer in this issue. However, the market speculation is that the company will offer rates between 8.50% to 9% per annum for a period of 3 years to 10 years.

I’ll update this post as the company discloses its rates.

Rating of the Issue – CRISIL, ICRA, CARE and India Ratings, all rating agencies have assigned ‘AAA’ rating to this issue. Also, these bonds are ‘Secured’ in nature i.e. in case of any default in interest payments or principal repayment at the time of maturity, the bondholders will have the right to make claim on certain assets of the company.

NRI/QFI Investment Not Allowed – Like with most such recent NCD issues, Non-Resident Indians (NRIs) will not be able to make investments in this issue. Qualified Foreign Investors (QFIs) too are not eligible to invest in this issue.

Investor Categories & Allocation Ratio – The investors have been classified in the following four categories and the company is yet to announce what percentage of the issue will be reserved for each of the categories during the allocation process:

• Category I – Qualified Institutional Bidders (QIBs)
• Category II – Non-Institutional Investors (NIIs)
• Category III – High Net Worth Individuals, including HUFs, investing more than Rs. 10 lakhs
• Category IV – Resident Indian Individuals, including HUFs, investing up to Rs. 10 lakhs

Allotment on First-Come First-Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of over-subscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.

Listing & Allotment –These NCDs will get listed only on both BSE & NSE Exchanges. The listing will take place within 12 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on the stock exchanges.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs as the company is not providing the option to apply for these NCDs in physical or certificate form

No Lock-In Period – These bonds do not carry any lock-in period and you can buy/sell them on the stock exchanges at the market price whenever you want.

Loan Against Bonds – These bonds can be pledged or hypothecated for obtaining loans as per the terms set by the lending company.

Minimum & Maximum Investment – Investors are required to put in a minimum investment of Rs. 10,000 in this issue i.e. at least 10 bonds of face value Rs. 1,000 each. There is no upper limit for the investors to invest in this issue. 

Interest Payment Date – NHAI is yet to announce the interest payment date for these bonds.

Record Date – For the payment of interest or the maturity amount, record date will be 15 days prior to the date on which such amount is due to be payable.