NCDs – A Short Tour
Registering a company is easy but running it successfully is a daunting task. It is not the cup of tea for a common man. Expanding a business while competing with competitors in the domestic and international market demands you to follow well-designed marketing strategies. The implementation of the right strategy at the right time is essential. A working capital and other type of funds is also necessary to run a business smoothly. Businesses can raise their essential funds by issuing NCD IPOs and more available options taking into consideration the unavoidable factors.
Companies engaged in different businesses are in the need of funds from time to time. There arises the need of funds for distinct reasons. A few of the common reasons are the need for working capital, funds for operational purposes, business expansion, and more. For a company there are multiple options to raise the necessary funds. The available sources may not be suitable for every company. The options like IPOs, NCD IPOs, Bonds, and equity stocks that a company can use to raise money depends on the type of business structure.
Before we talk about a Nonconvertible Debenture and the advantage it provides to an issuer, let us have a brief information on IPOs, NCDs, bonds, invest in non-convertible debentures.
What is NCD type IPO?
Non-convertible debentures (NCD) are those debt instrument that cannot be converted into equities or shares. The interest rate of NCD depends on the company issuing the NCDs.
Below is the list of NCDs traded on the BSE and the NSE:
AAA Rated Listed NCDs Yielding Over 9% Returns
| SYMBOL | COUPON RATE (%) | FACE VALUE | LTP (Rs) | Current yield (%) | CREDIT RATING | MATURITY DATE |
|---|---|---|---|---|---|---|
| IBUCCREDIT | 9.20% | 1,000 | 910 | 10.11% | CRISIL AAA STABLE / CARE AAA STABLE | September 25, 2028 |
| IBULHSGFIN | 9.00% | 1,000 | 937 | 9.61% | CARE AAA / BWR AAA STABLE | September 26, 2026 |
| TATACAPHSG | 8.30% | 1,000 | 870 | 9.54% | CRISIL AAA STABLE / ICRA AAA STABLE | January 14, 2028 |
| IBULHSGFIN | 9.15% | 1,000 | 960 | 9.53% | CARE AAA / BWR AAA STABL | September 26, 2026 |
| IBUCCREDIT | 8.84% | 1,000 | 933 | 9.48% | CRISIL AAA STABLE / CARE AAA STABLE | September 25, 2028 |
| IBULHSGFIN | 8.79% | 1,000 | 950 | 9.25% | CARE AAA / BWR AAA STABLE | September 26, 2026 |
| IBUCCREDIT | 8.66% | 1,000 | 940 | 9.21% | CRISIL AAA STABLE / CARE AAA STABLE | September 25, 2023 |
| L&TFINANCE | 9.20% | 1,000 | 1,000 | 9.20% | CARE AAA STABLE / ICRA AAA STABLE / IND AAA STABLE | March 13, 2029 |
| IBUCCREDIT | 9.00% | 1,000 | 986 | 9.13% | CRISIL AAA STABLE / CARE AAA STABLE | September 25, 2023 |
| L&TFINANCE | 8.25% | 1,000 | 907 | 9.10% | CRISIL AAA STABLE / CARE AAA STABLE / IND AAA STABLE | December 23, 2022 |
Why do companies issue NCDs (non-convertible debentures)?
There is a specific reason behind issuing NCDS. Companies generally issue NCDs when they are in need of money and wish to raise fund from the market with a fixed maturity. The duration for maturity can range between 90 days to 20 years. NCDs (non-convertible debentures) cannot be withdrawn prior to its maturity but can be traded in the secondary market.
Investors are not allowed to withdraw non-convertible debentures before maturity. You can sell your NCDs in the secondary market because NCDs are listed on the stock market.
Who can buy NCD or hold NCDs?
Independent individuals, primary dealers, banking companies, and other corporates registered in the country and unincorporated bodies.
Interest rates
The highly rated or AAA rated NCDs in India at present are offering interest rate between 9.1% to 10.1 % (yield as on Dec 2021). Remember that NCDs with higher ratings comes with high rate of interest.
