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10.42% ECL Finance NCD Issue Opens: Should You Invest?

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On Thursday, the NBFC segment of the Edelweiss group announced the public issue of secured redeemable NCDs to woo retail investors at a time when recession fears and other macro scenarios hint at a further rate cut. In its second bi-monthly policy meet, the central bank cut the repo rate by 25 basis points to 6%. The key rate has an impact on overall interest rates in the economy as central bank vouch to transmit rates to the consumers.

The ECL Finance NCD issue is, however, suitable for investors with some risk appetite as these corporate NCD issues have some credit concerns and one cannot truly ignore the case.

Details of the NCD:
  
 

Details of the NCD:

The NCDs come at a face value of Rs 1,000 each, adding to Rs 1,500 million. The issue comes with an option to retain over-subscription up to Rs 1,500 million, aggregating up to Rs 3,000 million.

The tranche I issue opens for subscription on May 10, 2019. The issue, which will be listed on BSE, closes on June 7, 2019, with an option of an early closure, the company also said.

"Edelweiss has built a competitive position across businesses including the Credit segment, with a diversified product mix across corporate and retail customers. Our focus will be on maintaining the quality of our loan book. With the public issue of NCDs we will further diversify our funding sources", Deepak Mittal, MD & CEO of ECL Finance, said.

Objectives of the issue:
  

Objectives of the issue:

The funds which will be raised will be used for onward lending, financing, and for repayment of interest and principal of borrowings, the company said. Axis Bank Limited and Edelweiss Financial Services Limited are the lead managers for the issue.

Return:

Tenure Coupon Return
24 months 9.9% p.a.
39 months 10.2% p.a.
60 months 10.42% p.a.
Rating
  

Rating

The rating agency CRISIL has rated the issue "AA (Double A) or Stable. CARE Ratings has rated it as AA; positive.

Should you invest?
  
 

Should you invest?

After the IL&FS crisis and other downgrades on some of the companies, if you have the risk appetite to deal with any such unforeseen scenario, then you can lock your amount for a tenure not longer than 3 years as interest rate cycle is likely to reverse.

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