Aditya Birla Finance, one of India's leading non-banking financial company (NBFC), has opened its public issue of Rs 1,000 crore secured Non-Convertible Debentures (NCDs) on Wednesday, September 27. The NCDs will be available for subscription till October 12, 2023, with an option of early closure, the company said in an exchange filing.

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The issue comes with an additional green shoe option of Rs 1,000 crore, making it a substantial Rs 2,000 crore issue.

This move by the NBFC marks its first foray into the world of NCDs.

With a face value of Rs 1,000 and a minimum investment size of Rs 10,000, these NCDs are accessible to a wide range of investors. However, it is important to note that a demat account is necessary to participate in this issue.

Objective

The company intends to use at least 75 percent of the net proceeds for lending, financing, and also for repaying its existing borrowings.

Investment options

Investors have the choice of six debenture options, each with different tenures of three, five, and 10 years. These NCDs offer effective yields ranging from 7.99 to 8.09 percent per annum, with both annual and cumulative interest payout options. Notably, the 10-year NCD also provides a monthly payout option. The variety in options caters to different investment horizons and income preferences.

The terms of each series of the NCDs, offered under the issue are set out below:

(Source: Regulatory filing)

Lead managers

Trust Investment Advisors, AK Capital Services, JM Financial, and Nuvama Wealth Management (formerly Edelweiss Securities) are leading the management of this NCD issue.

Credit ratings

One striking feature of this NCD issue is its AAA rating with a stable outlook from two rating agencies, India Ratings & Research and ICRA. This is a highly reassuring rating for an NCD offering. The AAA rating signifies the highest degree of safety regarding the timely servicing of financial obligations and the lowest credit risk.

Investment considerations

While the Aditya Birla Finance NCD issue appears enticing, it's crucial for potential investors to weigh the pros and cons before committing their funds. The AAA rating is a strong indicator of safety, which is paramount in investments. Additionally, the offered interest rates are competitive compared to similar-rated NCD issues, providing potential for decent returns.

However, it's important to understand that all NCD issues, even those with AAA ratings, carry some degree of credit risk. It's essential to acknowledge this risk, as past instances have shown that even highly-rated NCDs can default. Additionally, NCDs can be less liquid compared to other investment options like debt funds, making it challenging to redeem them before maturity.

Also, investors should be mindful of taxation, as interest earned on these instruments is taxed at the income tax slab rate.

In conclusion, the Aditya Birla Finance NCD issue presents a decent investment opportunity but investors should carefully assess their risk tolerance and investment horizon before subscribing.

(Edited by : C H Unnikrishnan)