Good Fixed Income Option – Proposed ECL Finance Ltd. (Edelweiss) Public Issue – Secured NCDs

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Dear Friends,
                         ECL Finance Ltd is proposed to come up with a 800 Crore Secured NCD issue shorty. The issue has been rated “AA” by CARE and ICRA and instruments rated “AA” and above are recommended for investment by PenguWIN. The interest rates for 3 years, Annual Interest option, is expected to be around 10.45% and 5 years is expected to be around 10.6%. RBI is expected to cut down the interest rates further during the course of this calendar year, as you might be aware and investors who want stable returns from Fixed Income options can subscribe to this issue, especially if you are in the tax exemption bracket or upto 20.6% tax bracket (income upto 10L).

Edelweiss Financial Services Limited (www.edelweissfin.com) was incorporated on 21st November 1995 with an aspiration to become one of the leading financial services groups in India. The Group’s businesses are broadly divided into Credit including Retail Finance, Commodities, Financial Markets, Asset Management and Life Insurance. It is a listed company since December 2007 under the symbols NSE: EDELWEISS, BSE: 532922, Reuters: EDEL.BO and Bloomberg: EDEL.IN.

Investors would need a DEMAT A/c (need to check if Non-Demat option is available) and the interest amount will be automatically credited to your Bank A/c. The advantage of a Non-Convertible Debenture (NCD) is the good liquidity option that it provides and all past good NCDs are trading at higher values than the issue price. PenguWINs forecast is that this issue will also trade at a premium to the issue price 6 months down the line when the interest rates are further slashed by RBI and provide an additional opportunity of capital gains for investors, in case if you want to exit.

One point to keep in mind is that Investments in Income Funds of Mutual Funds will get the benefit of Indexation for period of over 3 years (as per current Income Tax rules) which will not be available for ECL Finance Issue, that offers assured returns.

The demand for this issue is expected to be high and we anticipate the issue to be subscribed fully within the first few days of the launch.

 The effective yields for different tax brackets will be as follows:

ECL Finance Ltd.
Income Pre-Tax Yield Post-Tax Yield
Upto 2.5 L 10.45% 10.45%
2.5L to 5L 10.45% 9.37%
5L to 10L 10.45% 8.30%
Above 10L 10.45% 7.22%
Bank Deposit
Income Pre-Tax Yield Post-Tax Yield
Upto 2.5L 8.75% 8.75%
2.5L to 5L 8.75% 7.85%
5L to 10L 8.75% 6.95%
Above 10L 8.75% 6.05%

I have also given the comparative yield of 3 year Bank deposits which is about 8.75% now.

Please revert back if you have any further questions or if you are interested in subscribing to the issue and PenguWIN will be glad to assist.

 <Blog # PenguWIN 1025 – Good Fixed Income Option – Proposed ECL Finance Ltd. (Edelweiss) Public Issue – Secured NCDs> 

Category: Fixed Income

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