While debt investments are a must in any investment portfolio, in the current financial climate it is a somewhat difficult task to get the right type of returns. The tried and tested avenues are giving low returns right now and the ones with higher returns, such as some Corporate FD’s, come with their fair share of risks attached. In this scenario, people looking at fixed income for their regular retirement expenditure are the hardest hit.
Tata Capital Financial Services Limited ( TCFSL ) is a trusted name in the area of financial services and they are coming up with some Non Convertible Debenture (NCD) which may well be worth a look. Let us first look at the salient features of these NCD’s and then I will outline as to whether it will be a good idea to invest in them.
- Issue size is Rs 6000 crores in secured redeemable NCD and the face value of each NCD is Rs 1000 . Unsecured, subordinate rated NCD part is Rs 1500 crores.
- Issue opens today and will close on September 21st. However, allotment is on first come first served basis.
- Minimum lot is 10 debentures and you can increase it by any amount thereafter.
- The NCD’s will be listed in both BSE and NSE.
- 3 year, 5 year and 10 year coupon rates for retail investors are 8.8 %, 8.9 % and 9.1 % respectively.
- The 10 year NCD invests in Unsecured, subordinated, rated and listed securities.
- Retail investors can invest up to Rs 10 lacs in this issue, HNI investors can put in more money than that. Coupon rates for both categories are the same.
- Ratings of these NCD’s are AAA from both CRSIL and CARE.
- You must have a Demat account to invest in these NCD’s.
- Income from these will be treated as interest income and treated accordingly for the purposes of taxation.
- Capital gains will follow taxation treatment for Debt investments – your slab rate without indexation if held for lass than a year and 10 % without indexation if held for more than a year.
- There will be no TDS on paid out interest, which is annual in nature.
Based on the above, who should look at investing in these NCD’s? I think it will make sense to people who are looking for regular passive income, whether they are in the FI state or retired. Choose the secured route and 5 years tenure only, I am generally uncomfortable with unsecured securities.
For retired people who have maxed out their VVY, SCSS, Tax free bonds and PPF from where they get regular income and still need some amount to run their regular expenses, this can be a really good option. As the payout is annual, you can use it for goals which are annual in nature – examples can be a vacation, health insurance premium etc. The company is a completely trustworthy one and you need not have any worries about your payments. Go ahead and invest in this with confidence.
For others too, if you are looking at 89000 Rs every year for some expenditure, it will be a good idea to invest. It will work out the best for people in the 10 % or 20 % tax bracket. In any case you are having FD’s then it is a good idea to put the money here.
I will be happy to answer any queries on this investment.