5 Top Reasons Why You Should Invest in Piramal Enterprises NCD Issue 2023

Introduction

In this blog post, I am providing 5 top reasons why you should invest in Piramal Enterprises NCD issue 2023. As per Press Release in The Economic Times, Piramal Enterprises Limited, a part of the Piramal group has launched a public issue of secured, rated , listed and redeemable non-convertible debentures (NCD) to raise Rs 1000 crore to fund its business growth. The issue opened for subscription on October 19, 2023, and will close on November 2, 2023

Through this blog post, I intend to guide you about this NCD issue and specify reasons why it is a good and safe investment by analysing various parameters .

Issue Details of Piramal Enterprises NCD Issue 2023

The NCD issue opened for subscription on October 19, 2023 and will close on November 2, 2023. The company aims to raise up to Rs 1,000 crore through this issue, with an option to retain oversubscription up to Rs 2,000 crores. These NCDs have a face value of Rs 1,000 each and are offered in four series with tenures ranging from 26 months to 120 months with the possibility of early closure or extension in accordance with the Securities and Exchange Board of India Issue and Listing of (Non-Convertible Securities) Regulations 2021. The proposed listing of the NCDs will take place on both BSE and NSE, with BSE designated as the primary Stock Exchange for this issue.

What are Non Convertible Debentures (NCD)

Non Convertible Debentures are debt instruments that pay a fixed rate of interest and cannot be converted into equity shares of the issuer. Non-convertible debentures are used as tools to raise long-term funds by companies through a public issue.

Some of their advantages are

NCDs are closely monitored and regulated by The Reserve Bank Of India
NCDs are relatively safe investments as compared to other unsecured forms of investment
No TDS is deducted on the interest earned from NCDs

A Brief on Piramal Enterprises Limited

Piramal Enterprises Limited is a non-banking financial company (NBFC) that provides wholesale and retail lending solutions. It is a part of The Piramal Group a global business conglomerate with diverse interests in pharma, financial services and real estate. The Group has offices in over 30 countries and a global brand presence in more than 100 markets, and operates with over 10,000 people worldwide .

It is one of India’s leading diversified non-banking financial companies (NBFC) with assets worth ~$10 billion, with a network of over 400 branches across 26 states/Union Territories. It has a diversified portfolio of lending products across real estate, corporate, SME and retail segments. It also has a presence in the life insurance sector through its joint venture with Pramerica Life Insurance. The company has reported a consolidated net profit of Rs 1,023 crore for the quarter ended June 30, 2023, as compared to a net loss of Rs 1,703 crore in the same quarter last year.

Purpose of Piramal Enterprises NCD Issue 2023

The company intends to use the net proceeds of the issue for repayment or prepayment of interest and principal of existing borrowings of the company and for general corporate purposes.

Reasons For Investment in Piramal Enterprises NCD Issue 2023

#1 Attractive returns

The NCDs offer coupon rates ranging from 8.75% to 9.34% per annum, which are higher than the prevailing interest rates on bank fixed deposits, government bonds and other debt instruments. The NCDs also have a quarterly interest payment option, which can provide regular income to the investors.

#2 High safety

The NCDs have been rated AA/Stable by ICRA and CARE, indicating a high degree of safety regarding timely servicing of financial obligations. The company has a strong balance sheet, diversified business segments, robust cash flows and adequate liquidity to meet its debt obligations .

#3 Tax efficiency:

The interest income from the NCDs is taxable as per the income tax slab of the investor. However, there is no tax deducted at source (TDS) on the interest payments, which can save the hassle of filing tax returns and claiming refunds for some investors. Moreover, if the NCDs are held in demat form and sold on the stock exchanges after one year, the capital gains are taxed at 10% without indexation or 20% with indexation, whichever is lower.

#4 Easy liquidity

The NCDs will be listed on both BSE and NSE, which will provide an exit option to the investors in case they need to sell their holdings before maturity. The company has also appointed a lead manager and a registrar for the issue, who will facilitate the allotment, listing and trading of the NCDs.

#5 General corporate purposes

The company intends to use the net proceeds of the issue for repayment or prepayment of interest and principal of existing borrowings of the company and for general corporate purposes. This will help the company to reduce its debt burden, improve its capital structure and enhance its operational efficiency .

Features And Benefits

What is the Minimum Investment required for Piramal Enterprises NCD Issue 2023

The minimum investment amount for the Piramal Enterprises NCD issue is Rs 10,000 (10 NCDs) and in multiples of Rs 1,000 (1 NCD) thereafter. This means that you can invest in any number of NCDs as long as the total amount is a multiple of Rs 1,000 and not less than Rs 10,000. For example, you can invest Rs 15,000 (15 NCDs), Rs 20,000 (20 NCDs), Rs 25,000 (25 NCDs) and so on. However, you cannot invest Rs 12,000 (12 NCDs) or Rs 18,000 (18 NCDs) as they are not multiples of Rs 1,000. You can apply for the NCDs through online or offline modes by filling the application form and submitting the required documents and payment.

What are the Documents required for Application?

The Documents required for application of Piramal Enterprises NCD issue depend on the mode of application and the category of the investors. According to the the draft prospectus, the following documents are generally required

Documents required for online application are :

A valid PAN card
A valid demat account number
A valid bank account number
A valid email address and mobile number

Documents required for offline application are :

A duly filled and signed application form
A cheque or demand draft for the application amount
A self-attested copy of PAN card
A self-attested copy of address proof
A self-attested copy of cancelled cheque or bank statement
A self-attested copy of demat account statement

Additionally, some categories of investors may need to submit additional documents, such as income proof, KYC documents, tax status certificates, etc. For more details, please refer to the draft shelf prospectus or contact the lead manager or registrar of the issue.

Conclusion

If you are looking for steady returns as an Investor and have a medium to long term investment horizon, then you may consider investing in this NCD issue. However, you should also be aware of the risks involved in investing in debt instruments, such as interest rate risk, credit risk, liquidity risk and taxation issues. You should read the draft shelf prospectus carefully before making any investment decision.