Mahindra and Mahindra Financial Services Ltd (Mahindra Finance) plans to raise Rs 2,000 crore through the issuance of debt securities to fund future lending and settle current liabilities. The company will float non-convertible debentures- Unsecured (NCDs) to raise the money, which will be open to subscription on 10-28 July.
NCDs with a face value of Rs 1,000 each have a base issue size of Rs250 crore with an option to retain subscriptions of up to Rs 1,750 crore. This is the first tranche of the issue and the funds to be raised will be used for onward lending, financing, refinancing the existing indebtedness, and using it as long-term working capital and general corporate purposes.
RATING: – These debt instruments are rated AAA with a stable outlook by India Ratings and Brickwork Ratings, considered to have the highest degree of safety.
Ø Offer Period: July 10-28, 2016
Ø Annual Interest Rates: –
Ø Price of each bond: Rs 1,000
Ø Minimum Investment: 10 Bonds (Rs 10,000)
Ø Allotment: First Come First Serve.
Ø Listing: Bonds would be listed on BSE and will entail capital gains tax on exit through the secondary market.
Our Take: – This can draw parallel to your Interest generating Debt Instrument Like Bank FDs, As FD rates are sub 7% currently. Hence, for an investor at 0-10% Tax bracket, this will make sense.
However, as we move towards higher income brackets, post-tax returns diminish. A 3 Years AAA, major, FMP becomes more rewarding at 6.9%-7% (significantly low tax). Also, what bothers me is the High holding period which is a minimum of 7 years, & in this time frame, there are many other competitive instruments.
Yogendra Shah – Head- Client Advisory at SNMA Enterprise Pvt. Ltd