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L & T Finance NCDs offers attractive five years investment option | Ratekhoj.com, Best Fixed Deposits, Loans, Insurance Rates and Credit Cards


August 24, 2009. L&T Finance Limited (”the Company”), promoted by engineering and construction giant Larsen & Toubro Limited and L&T Capital Holdings Limited and providing a range of financial services, will open on August 18, 2009, its first-ever public offer of 50,00,000 Secured Redeemable Non-Convertible Debentures (”NCDs”) of the face-value of Rs. 1,000 each. The NCD Issue aggregates to Rs. 500 crore, with an option to retain over-subscription up to Rs. 500 crore for issuance of additional NCDs, aggregating upto a total of Rs. 1,000 crore. The NCD Issue with various investment options and yield on Redemption of upto 10.50% (per annum) opens on August 18, 2009, and closes on September 4, 2009.

The NCDs offered through the Prospectus are proposed to be listed on National Stock Exchange of India Limited (”NSE”). The face value of Rs. 1,000 per NCD and tradable lot size of 1 NCD is expected to enhance liquidity and trading in the secondary market.

The NCDs have been rated ‘CARE AA+’ by CARE and ‘LAA+’ by ICRA. Instruments with a rating of ‘CARE AA+’ by CARE are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk. The rating of ‘LAA+’ by ICRA indicates high-credit-quality and the rated instrument carries low credit risk.

As compared to fixed deposits of 5 years duration, these L & T NCDs offer attractive interest rates.

Currently KTDFC (a company) offers the highest interest rate of 9.25 for a 5 year fixed deposit with a deposit amount of less than Rs. 25 lakhs which is the case for most retail fixed deposits. The next highest interest rate of 8.81% for 5 year fixed deposits for non-senior citizens is offered by T N Power Finance (also a company).

Among public sector banks in India, State Bankof Bikaner and Jaipur is offering the highest rate of 8.25% (annualized yield of 10.08%) for a FD term of 5-10 years. Among other banks, DBS Bank (a foreign bank) is also the same interest rate of 8.25% for a term of 5 years.

Investors in L & T NCDS can expect an annualized yield of 10.50% under Option 4 (details below) while the yield is lower under other options.

There are four investment options (please see the prospectus for complete details) for the L & T NCDs:

Option 1 (Quarterly interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months. from the deemed date of allotment. The coupon rate is 9.51% p.a. and the annualized yield is 9.85%. The interest payment is quarterly and the face value plus any interest that may have accrued is payable on redemption.

Option 2 (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months from the deemed date of allotment. The coupon rate is 9.62% p.a. and the annualized yield is 9.85%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.

Option 3 (Cumulative interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 88 months from the deemed date of allotment. The coupon rate is 9.95% compounded annually and the annualized yield is 9.95%. The interest payment is cumulative and Rs. 2,005 per NCD is payable on redemption.

Option 4 (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 120 months from the deemed date of allotment. The coupon rate is 10.24% p.a. and the annualized yield is 10.50%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.




Comments

2 Responses to “L & T Finance NCDs offers attractive five years investment option”

  1. Komal on August 25th, 2009 8:11 pm

    can NRI’s invest in this option

  2. Ram Vishnu on August 26th, 2009 11:40 am

    No, NRIs cannot invest in this per their prospectus

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