10.25% Kosamattam Finance Limited NCD – Dec’16/Jan’17 – Should you Invest?

Kosamattam Finance NCD - Dec 2016 - Should you Invest

Kosamattam Finance Ltd – NCD – Dec 2016 – Should you Invest?

Kosamattam Finance has come out with public issue of non-convertible debentures (NCD) offering up to 10.25% interest rate. The issue opens on December 22, 2016 and closes on January 20, 2017.

Kosamattam Finance Ltd is a Kerala Based NBFC engaged in gold loan finance business. They lend money against the pledge of household Jewellery in the state of Kerala, Tamilnadu, Karnataka, Andhra Pradesh, Delhi and in the Union Territory of Puducherry. They also offers fee based ancillary services which include money transfer services, foreign currency exchange and air ticketing services.

Kosamattam Finance NCD – Significant Points:

  • Offer Period: December 22, 2016 to January 22, 2017
  • Annual Interest Rates for Retail Investors: 9.00% to 10.25% depending on tenure
  • Price of each bond: Rs 1,000
  • Minimum Investment: 10 Bonds (Rs 10,000)
  • Max Investment Limit for Retail Investor: Rs 10 Lakhs
  • Credit Rating: IND ‘BBB-’ by India Ratings & Research Private Limited
  • NCD Size: Rs 150 crore with option to retain oversubscription upto Rs 300 crore
  • Allotment: First Come First Serve
  • Listing: Bonds would be listed on BSE & NSE and will entail capital gains tax on exit through secondary market

Also ReadKnow NCD – Investment Tips, TDS and Taxation

Kosamattam Finance NCD – Investment Options:

There are 8 options of investment in Kosamattam Finance Limited NCD.

Kosamattam Finance Limited NCD - December 2016 - Investment Options

Kosamattam Finance Limited NCD – Dec’16/Jan’17 – Investment Options

Kosamattam Finance NCD – Who can Apply?

This issue is open to all Indian residents, HUFs and Institutions.

  • Category I – Institutional Investors – 30% of the issue is reserved
  • Category II – Non-Institutional Investors, Corporates – 20% of the issue is reserved
  • Category III – Retail Individual Investors including HUFs – 50% of the issue is reserved

However NRIs cannot apply for this NCD.

Why you should invest?

  1. The NCD is secured, which means the above debt is backed by assets of the company
  2. The interest rates are 3% higher than your regular FDs

Also Read: Highest Interest Rate on Recurring Deposits

Why you should not invest?

  1. “BBB-” rating can be considerd poor rating and has higher risk of default or non payment – retail investors should stay away
  2. The profits of the company declined as compared to the previous year
  3. You can also invest in high rated company fixed deposits

How to Apply?

You can apply online by ASBA facility provided by banks. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work.

Learn: How to apply for NCD issues using ASBA?

In case you don’t want to do it online, you can download the application form from company site or Financial Institutions and submit to collection centers.

Recommendation:

My recommendation is to stay away due to POOR credit rating – as the returns do not justify the risk.

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