Non convertible debentures (NCDs) | Secured Srei NCDs
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Non-Convertible Debentures (NCDs)

Whether you are an individual or an institution and seeking secured income by parking your money for a long period, then NCDs could be a good investment option.

An NCD is a financial instrument to raise money from the public via the issue of a debt paper for a specified tenure. NCDs cannot be converted into debentures or equity shares. Upon maturity, the principal amount along with accumulated interest is paid to the holder of the NCD. It works on the same principle as a bank fixed deposit, however, there are certain salient features that make an NCD more attractive.

Salient Features of NCD

  • Higher rate of returns: NCDs in the past have offered interest rates which were quite attractive as compared to interest on other fixed-income options.
  • Flexible tenure: The tenure of NCDs can be anywhere between 2 years and 20 years, thereby providing better maturity opportunities.
  • Lower credit risk: An NCD loses value when interest rate in the system goes up and gains when the interest rate declines. However, when the NCD is held until maturity, one is likely to realize the promised return and the risk due to movement in interest rates is eliminated or minimized.
  • Professionally rated: NCDs are rated by certified and professional credit rating agencies.
  • Easy liquidity: NCDs are generally listed securities hence one can sell them in the secondary market before maturity.
  • Capital appreciation: As NCDs are listed securities, it can benefit from the fluctuations in stock market and may have capital appreciation.
  • No Tax deduction at source: There is no tax deduction at source (TDS) on NCDs offered in DEMAT mode and listed on a stock exchange as per section 193 of the IT Act.
  • Interest Payout Options: One could look at different interest payout options offered by NCDs such as monthly, quarterly, half-yearly or annual interest payments.

Where to apply?

Srei Infrastructure Finance Limited periodically launches Non-Convertible Debentures (NCDs) through two routes:

  • Public Issue: In this method the NCDs are sold to the public at large in the primary market. Bids are collected from investors and the NCDs are listed in the stock exchanges. The NCDs are offered through a window of fixed duration as an Initial Public Offer (IPO). Subscribe for email alerts
  • Private Placement: In this process NCDs are offered to a small set of clients through a clutch of distributors, usually through word-of-mouth publicity as regulations donot permit companies to advertise or market these bonds. Here the NCDs may or maynot listed in the stock exchange.

Who Can Apply for NCDs?

Category I (Institutional Category)
  • Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional Rural Banks which are authorized to invest in NCDs.
  • Provident Funds, Pension Funds, Superannuation Funds and Gratuity Fund, which are authorized to invest in NCDs.
  • Venture Capital Funds and/or Alternative Investment Funds registered with SEBI.
  • Insurance Companies registered with IRDA.
  • National Investment Funds.
  • Mutual Funds.
Category II (Non Institutional Category)
  • Companies; bodies corporate and societies registered under applicable laws in India and authorized to invest in the NCDs.
  • Public/Private Charitable/Religious trusts which are authorized to invest in NCDs.
  • Scientific and /or industrial research organizations; which are authorized to invest in the NCDs.
  • Partnership firms in the name of partners; and
  • Limited Liability Partnership formed and registered under the provisions of the LLP Act, 2008 (No.6 of 2009).
Category III (Individual Category)
  • Resident Indian Individuals.
  • Hindu Undivided Families through the Karta.

Taxation on NCD

As per section 193 of the Income Tax Act, 1961, there is no tax deduction at source (TDS) from any securities issued by a company, in a dematerialized form and listed on a recognized stock exchange in India. However, NCDs allotted to non-resident Indians (NRIs) will be subject to TDS as per section 195 of the Income Tax Act, 1961.

For individual investors, if the NCDs are sold before a year, the profits will be added to the income of the investor and he will have to pay taxes at the same rate as per the income tax slab. For any profit made by selling NCDs after a year, tax will be paid at 10%, if indexation is not done or 20% if the indexation is done.

KYC (Know-Your-Customer) Documentation for NCD

Applicants who do not have a Demat account and are applying for NCDs in the Physical Form, have to submit the following KYC documents:

Proof of Identification.

Self-attested copy of the proof of identification (for individuals). Any of the following documents shall be considered as a verifiable proof of identification:
  • Passport
  • Voter's ID
  • Driving Licence
  • Government ID Card
  • Defence ID Card
  • Photo PAN Card
  • Photo Ration Card

Proof of Recognition by Income-Tax Authority.

Self-attested copy of the PAN card.

Proof of Residence.

Self-attested copy of the proof of residence. Any of the following documents shall be considered as a verifiable proof of residence:
  • Ration card issued by the Govt. Of India (GoI)
  • Valid driving license issued by any transport authority of the GoI
  • Electricity bill (not older than three months)
  • Landline telephone bill (not older than three months)
  • Valid passport issued by the GoI
  • AADHAR Card / Letter issued by Unique Identification Authority of India ("UIDAI")
  • Voter's Identity Card issued by the GoI
  • Passbook or latest bank statement issued by a bank operating in India
  • Registered leave and license agreement or registered agreement for sale or rent agreement or flat maintenance bill
  • Self-Attested copy of Registered Office address in case of Applicants under Category I or Category II or
  • Life insurance policy

Proof of Bank Account.

Self-attested copy of a cancelled cheque of the bank account to which the amounts pertaining to payment of refunds, interest, as applicable, should be credited.

Allotment Procedure for NCD

  • Allotment in the First Instance:
    • Applicants belonging to the Institutional Portion, in the first instance, will be allocated NCDs up to 30% of Overall Issue Size on first come first serve basis which would be determined on the basis of upload of their Applications in to the Electronic Book with Stock Exchange.
    • Applicants belonging to the Non-Institutional Portion, in the first instance, will be allocated NCDs up to 30% of Overall Issue Size on first come first serve basis which would be determined on the basis of upload of their Applications in to the Electronic Book with Stock Exchange.
    • Applicants belonging to the Individual Category Portion, in the first instance, will be allocated NCDs up to 40 % of Overall Issue Size on first come first serve basis which would be determined on the basis of upload of their Applications in to the Electronic Book with Stock Exchange.
  • Allotment Under Subscription:

    Under subscription, if any, in any Portion, priority in allotments will be given in the following order:

    • Individual Category Portion
    • Non-Institutional Portion
    • Institutional Portion
  • Allotment on a First Come-First Serve basis:
    • For each Portion, all Applications uploaded in to the Electronic Book with Stock Exchange would be treated at par with each other. Allotment would be on proportionate basis, where NCDs uploaded into the Platform of the Stock Exchange on a particular date exceeds NCDs to be allotted for each Portion respectively.
    • Minimum allotments of 1 (one) NCD and in multiples of 1 (one) NCD thereafter would be made in case of each valid Application.
  • Allotment in Case of Over-Subscription:
    • First Come-First Serve basis:

      In case of an over-subscription, allotments to the maximum extent, as possible, will be made on a first-come first-serve basis. Thereafter on proportionate basis, i.e. full allotment of NCDs to the Applicants on a first come first basis, up to the date falling 1 (one) day prior to the date of over-subscription, and proportionate allotment of NCDs to the Applicants on the date of over-subscription (based on the date of upload of each Application into the Electronic Book with Stock Exchange, in each Portion).

    • Proportionate Allotments:

      For each Portion, on the date of over-subscription:

      • Allotments to the Applicants shall be made in proportion to their respective Application size, rounded off to the nearest integer,
      • If the process of rounding off to the nearest integer results in the actual allocation of NCDs being higher than the Issue size, not all Applicants will be allotted the number of NCDs arrived at after such rounding off. Rather, each Applicant whose allotment size, prior to rounding off, had the highest decimal point would be given preference,
      • In the event, there are more than one Applicant whose entitlement remain equal after the manner of distribution referred to above, our Company will ensure that the basis of allotment is finalized by draw of lots in a fair and equitable manner.

Application Procedure for NCD

  • Without using ASBA (Applications Supported by Blocked Amount) Facility
    • Applications through the Members of the Syndicate/ Trading Members of the Stock Exchange through Collecting Banks without using ASBA Facility

      All Application Forms duly completed and accompanied by account payee cheques / drafts shall be submitted with the Members of the Syndicate, Trading Members of the Stock Exchange before the closure of the Issue. The Applications are to be submitted to the Members of the Syndicate and Trading Members on a timely manner so that the details can be uploaded on to the platform of the Stock Exchange during the Bidding Period. The cheque/bank draft can be drawn on any bank, including a co-operative bank, which is situated at and is member or sub-member of the Bankers clearing-house located at the place where the Application Form is submitted.

    • Applications for allotment of physical NCDs by Applicants who do not have a Demat Account

      All Applicants who intend to apply for NCDs in physical form should submit the Application Forms duly completed and accompanied by account payee cheques / drafts and the KYC documents shall be submitted with the Members of the Syndicate, Trading Members of the Stock Exchange. Cash/Stock invests/Money Orders/Postal Orders will not be accepted.

  • Using ASBA (Applications Supported by Blocked Amount) Facility and/or SCSB (Self-Certified Syndicate Bank) Facility

    ASBA Applicants applying through a member of the Syndicate should ensure that the Application Form is submitted to a member of the Syndicate only in the Specified Cities. ASBA Applicants should also ensure that Application Forms submitted to the Syndicate in the Specified Cities will not be accepted if the SCSB where the ASBA Account, as specified in the Application Form, is maintained has not named at least one branch at that location for the Syndicate to deposit the Application Form from ASBA Applicants Those Applicants who wish to apply through the ASBA process by filling in physical Application Form will have to select the ASBA mechanism in Application Form and provide necessary details. The filled in Application Form containing instructions to SCSB to block the Application Amount shall be submitted to the designated branches of the SCSBs. The ASBA Applications can also be submitted with the Member of the Syndicate at the Syndicate ASBA Centres (only in Specified Centres) or with the Trading Members of the Stock Exchange.

Application Amount Utilization for NCD

The sum received in respect of the Issue will be kept in separate bank accounts and we will have access to such funds as per applicable provisions of prevailing legislations, regulations and approvals.

Issue Proceeds Utilization for NCD

  • All monies received pursuant to the Issue of NCDs to public shall be transferred to a separate bank account other than the bank account referred to in sub-section (3) of section 73 of the Act.
  • Details of all monies utilized out of Issue referred to in sub-item (i) shall be disclosed under an appropriate separate head in our Balance Sheet indicating the purpose for which such monies had been utilised.
  • Details of all monies not utilized out of issue of NCDs, if any, referred to in sub-item (i) shall be disclosed under an appropriate separate head in our Balance Sheet indicating the form in which such unutilised monies have been invested.
  • We shall utilize the Issue proceeds only upon allotment of NCDs as stated in this Prospectus and on receipt of the minimum subscription of 75% of the Base Issue.
  • The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other acquisition, inter alia by way of a lease, of any immovable property; however the Issue Proceeds may be used for issuing Loans against securities.