Religare Finvest, a systemically important non-deposit taking NBFC and wholly-owned subsidiary of Religare Enterprises, is entering the debt capital market with a public issue of secured redeemable non-convertible debentures (NCD) of face value Rs. 1,000 each on 9^th September 2011 to raise Rs. 400 crore with an option to retain another Rs 400 crore, taking the total fund raising to Rs. 800 crore.

This first-come-first-serve issue, rated 'AA-' by ICRA and CARE, indicating high degree of safety for timely servicing of financial obligation, closes on September 26, with an option in company's hands to either close the issue earlier or extend the closing. The NCDs, to be listed on BSE with one NCD comprising a trading lot, would be available only in the demat form with minimum application amount being fixed at Rs 10,000 and in multiples of Rs. 1,000 thereafter.  

Under the current issue, there are two different investment tenures being offered to investors - 3 years and 5 years. Based on the type of investor and tenure of instrument, different interest rates ranging from 12.00% to 12.50% pa are being offered:

Note: Interest will be paid annually in all the above options.

The highest rate of interest is being offered to individuals / HUFs / NRIs on non-repatriation basis for investment upto Rs. 5 lakh at 12.50% per annum for duration of 5 years, which is an attractive post-tax return of 8.64%, assuming the highest tax bracket. This coupon rate of 12.50% on 5 year NCD is the highest when compared to all recent NCD issues of Shriram City Union, Manappuram Finance, Muthoot Finance and India Infoline. The interest payable would be taxable (similar to bank FDs), although there is no tax deduction at source (TDS).

Religare Finvest provides SME financing through loan against property, commercial assets funding, automobile leasing, loan against marketable securities and working capital loans. Its aggregate loan book as at 30^th June 2011 stood at Rs. 9,927 crore, of which 36% is loan against property. Company had a networth of Rs. 1,610 crore as of 31^st March 2011 with CAR of 16.16% compared to RBI stipulated minimum requirement of 15%. Company's gross NPAs are also under control, standing at 0.10% while net NPAs as a percentage of net loan assets was 0.02%, as of 31^st March 2011. For FY11, company reported total income of Rs. 1,163 crore and earned net profit of Rs. 115 crore. Thus, it enjoys sound financial position along with a healthy balance sheet. Funds raised via the NCD issue will be used in various financing activities such as lending and investments.

This NCD issue is attractive for those individual / HUF investors looking to park funds in fixed investment schemes, and have not yet done so in the recent issues, as the interest rate is attractive in the current offering backed with good pedigree of Religare Group. Those looking for diversification can subscribe to the issue for 5 years at 12.50% pa interest so as to cap returns at the higher end, before interest rate cycle begins to ease out.