Securitized Debt Instrument: How SDI can help earn predictable, fixed returns? Expert answers

Securitized Debt Instrument (SDI) is the newest three-letter investment acronym to join a prestigious group of regulated financial products that have permanently altered the investment landscape for Indian investors. Nikhil Aggarwal, Founder & CEO, Grip Invest informs that unlike traditional methods of investment, SDI offers investors the ability to earn predictable, fixed returns over a defined period of time that are not subject to stock-market volatility. 

"SDI also provides the opportunity for higher returns than other fixed-income options like corporate bonds. This unique proposition of the SDI stems from its design which offers: (a) very clearly defined returns from a specific underlying asset; and, (b) a robust security structure," he informs. 

As per the founder and CEO of Grip Invest, Mutual Fund Investing (MFI) introduced the concept of passive diversification, allowing individuals to invest in a wide range of securities through a single investment vehicle. And Systematic Investment Plans (SIPs) addressed concerns about volatility by enabling investors to make regular investments over time, thereby mitigating the impact of market fluctuations. And he informs that Exchange-Traded Funds (ETFs) brought the advantages of passive investing, offering investors exposure to entire market sectors or asset classes.

Talking about the beackground of SDIs, he says, "The advantages of such securitization has led to the creation of a multi-billion dollar investment market for large institutional investors in India, and it was only October 2022 that the SDI product was first introduced for retail investors by Grip Invest at a more accessible investment amount of Rs 1 lakh." 

"Institutional investors have already been purchasing Rs 2 lakh crore worth of similar securities every year. This SEBI regulated D2C fintech, listed the first-ever SDI on the National Stock Exchange (NSE) on 7th October, 2022, making it possible for all investors to invest in SDIs. Over the last year Grip Invest alone has enabled over Rs 200 crore in investments in SDIs and the product is now being introduced by several other investment platforms such as Cube Wealth, Centricity, and WiseX," he adds. 

Investment platforms are also leveraging the SDI regulatory framework to offer variations which are bringing even more diverse and interesting investment propositions. Some of the most popular SDI products currently offered include — 
a) LeaseX: Offers fixed monthly rental income from leasing assets such as vehicles and machinery to large corporates 
b) LoanX: Offers fixed monthly interest from lending money to a large number of individuals or corporate borrowers identified and underwritten by an NBFC 
c) InvoiceX: Offers fixed monthly interest from investing in a pool of invoices issued to large corporates 
d) BondX: Offers fixed monthly interest from investing in a pool of corporate bonds  

Nikhil Aggarwal further elaborates, "The adoption of any new investment product lies as much in the convenience and trust of making an investment as it does in the attractive nature of returns. Recognizing this, SEBI has once again demonstrated foresight by including the SDI as a recognised instrument under its Online Bond Platform Providers (OBPP) framework."

He informs that in order to protect investors, SEBI has mandated that every SDI offered to retail investors must be — 
i) Rated by an independent rating agency such as CRISIL; 
ii) Listed on a stock exchange (NSE or BSE); and, 
iii) Overseen by a SEBI-regulated third-party i.e., a trustee) for managing returns. And adds that fintech companies like Grip Invest who operate under SEBI’s OBPP licence adhere to these norms and have enabled a fully digital experience of investing in SDIs. 

He sums up, saying, "The coming year is expected to see rapid growth in the adoption of SDIs, not just in volume but also the diversity of offerings and a growth in the number of platforms offering it. Macro factors such as the expected reduction in RBI repo rates and consequently in FD rates are also likely to make SDIs more attractive as compared to other fixed-income investment options. SEBI has also recently proposed to reduce the minimum investment amount for SDIs from Rs 1 lakh to Rs 10,000, which would further increase the attractiveness and access of this investment option."