The NCD, which will open for subscription on 17 August and closes on 6 September, has a base issue size of ₹200 crore, with an option to retain oversubscription up to ₹200 crore, aggregating up to ₹400 crore.
The issue by Edelweiss Financial is secured, which means that in the event of liquidation, secured investors will get the first preference.
At least 75% of the funds raised through the issue will be used for repayment or prepayment of interest and principal of existing borrowings of the company and the rest is proposed to be utilized for general corporate purposes.
The NCDs will be listed on BSE.
There are eight series of NCDs carrying fixed coupon and with tenures of 36 months, 60 months and 120 months with annual, monthly and cumulative interest option. The effective annual yield for NCDs will range between 9.09% and 9.70%.
Moreover, an additional incentive of up to 0.20% per annum will be offered to investors who are also holders of NCDs, or bonds previously issued by Edelweiss Financial Services, or its group companies, such as ECL Finance Ltd, Edelweiss Housing Finance Ltd, Edelweiss Retail Finance Ltd and Edelweiss Finance & Investments Ltd.
The NCDs proposed to be issued have been rated AA with a negative outlook by Acuite Ratings and Research, and A+ with a negative outlook by Icra Ltd. According to experts, these ratings mean that the debentures carry low credit risk, but are not as safe as AAA-rated instruments.
“The issue is below AA/AA+ rating, so it falls under the low credit category. At this point of time, it’s risky to get into low credit instruments because the economy is still at a very delicate juncture. However, since it is a secured NCD, maybe some part of the money can be recovered in case of liquidation. Still, there is no guarantee that the entire money can be recovered," said Rushabh Desai, a Mumbai-based mutual fund distributor.
“I would not recommend investors to venture into any low credit instruments at this time. Once the growth is normalized in the economy, we can have a fresh look at certain low-credit bonds and NCDs," he added.
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