Aditya Birla Finance's NCD issue is open for subscription; key things to know

Aditya Birla Finance, one of the leading non-banking financial companies in India, has come up with a public issue of non-convertible debentures (NCD). The company, through its maiden NCD issuance, aims to mop up to Rs 2,000 crore.

For the unversed, NCDs, or non-convertible debentures, are long-term or mid-term financial instruments issued by a corporation for raising funds that do not come with a provision of conversion into company stocks or equity.

Here are the finer details around the issue that investors can note:

Issue details: The NCD issue opened on September 27 and will close on October 12, with an option of early closure. The company will be issuing secured, rated, listed, and redeemable NCDs each carrying a face value of Rs 1,000, aggregating up to Rs 2,000 crore.

Investors need to invest in a minimum of 10 bonds (Rs 10,000) across all series together and in multiples of Rs 1,000 thereafter.

These bonds come with tenure options of 3 years, 5 years, or 10 years offered with monthly', 'annual', or ‘cumulative’ interest payment frequency.

Trust Investment Advisors Private Limited, A.K. Capital Services Limited, JM Financial Limited, and Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited) are the lead managers of the issue. 

Objective: The company proposes to deploy at least 75 per cent of the net proceeds of the issue towards onward lending, financing, and repayment of interest and principal of existing borrowings. The remaining mopped-up sum will be put towards general corporate purposes.

Rating:  

India Ratings and Research has assigned an IND AAA rating to the issue with a stable outlook. ICRA has also been accorded an ICRA AAA (stable) rating. “The ratings are valid and will continue to be valid for the life of the instrument unless withdrawn or reviewed. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry the lowest credit risk,” said the company in an exchange filing.

Interest Rate:

Aditya Birla NCD offers an attractive return rate of between 8 and 8.1 per cent per annum for its annual options. However, the effective yield across its several options comes to be between 7.99 and 8.09 per cent per annum.  

About the company

Aditya Birla Finance is registered with the RBI as a non-deposit-taking systemically important non-banking financial company. As of the quarter ended June 2023, the company had a total asset under management (AUM) of around Rs 3.9 lakh crore and an aggregate lending book of more than Rs 1 lakh crore via its subsidiaries and JVs.

So, conventional investors looking to diversify their debt portfolio can consider the instrument given the higher rate of return than most bank FDs and other AAA-rated securities. Also, note that these NCDs are liquid and are being listed on the bourses.

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