Aug 24, 2009

L&T Finance NCD – A Brief Overview

Photo by michelle

The latest Non-convertible debenture (NCD) issue by L&T Finance is the third retail issue of NCDs by an NBFC during the year 2009. The first one was by TATA Capital (TCL) in February 2009 and second was by Shriram Transport Finance (STFL) in July 2009.

The basic features of the current NCD issue by L&T Finance remains the same which I’ve already covered in previous posts: ‘
Should You Invest in NCDs?’ and ‘NCDs – Top 10 FAQs’.

Here in this post, a comparison of L&T Finance NCD issue is made with the previous two NCD issues to give you a better perspective.

L&T Finance NCD offer: Comparison with Previous NCD issues

1. Returns:
As expected, with every new issue of NCD, yield is coming down. TCL offered a YTM of 11.57% to 12% and subsequently Shriram Transport (STFL) offered a yield to redemption of 10.75—11.50%. And now L&T Finance NCD effective yield is in the range of 9.85—10.50%. Still the yields are quite attractive when compared to bank fixed deposits (FDs). The current interest / coupon rate differential between a NCD and a bank’s FD is around 2—2.5 per cent.

2. Tenure: While both the previous issues of NCDs allowed you to invest for a maximum period of 5 years, L&T Finance NCD is also offering you longer durations. So, if you wish you can lock-in for a period of 88 months (7-Yr 4 months) or 10 years at high rate of interests. Second, the minimum duration of investment is also higher 5 years as compared to 3 years in earlier issues.

3. Put/ Call Option: Unlike TATA Capital NCD issue in which all the four investment options had put/call option attached and Shriram Transport Finance NCD issue where two investment options out of the five had put and call option, the latest NCD issue by L&T finance doesn’t have any Put and call option clause.

4. NRIs: Similar to TATA Capital NCD issue, L&T Finance is also not offering the NCDs to non-resident Indians (NRIs). However, Shriram Transport Finance NCD had some portion reserved for NRIs.

Rest almost everything is same including good credit rating (AA+ by CARE and LAA+ by ICRA), the L&T Finance NCD issue has received. The offer is open for subscription from August 18, 2009 to September 4, 2009.

Should I invest?
Yes, of course. Go ahead and invest before the yields come down any further.

Also see:

Should You Invest in NCDs?
NCDs – Top 10 FAQs
Interesting Interest Information about FDs


  1. What are Put/ Call Options?

  2. Just wait for a few days. This feature (Put & Call option) will be explained in detail in my next post about NCDs.

  3. Are their any yield calculators for NCDs listed on NSE


You’re welcome to post a comment if you’d like to air your views, or if you’ve any further question to ask, but please stick to the topic and don’t forget to write your name.