If you want you to get interest at the rate of 7.15 per annum, then the investment opportunity has come for you. Power Finance Corporation Limited, one of India’s leading financial institutions, has introduced a taxable non-convertible debenture (NCD) issue of Rs 5,000 crore.
How much interest will you get?
- NCDs of three years offer fixed interest rates ranging from 4.65 % per annum to 4.80 % per annum.
- The five-year term NCDs offer an interest rate of 5.65% to 5.80% per annum.
- Subject to the minimum rate or the maximum rate prescribed in NCDs of 10 years duration and in floating interest. The fixed interest rate ranges from 6.63 % per annum to 7.00 % per annum.
- NCDs of 15 years have multiple fixed interest rates with a maximum interest rate of 7.15 % per annum.
Lowest Deposit Rates.
NCD has been rated ‘Care AAA’ Stable by Care Rating Ltd., ‘CRISIL AAA / Stable’ by CRISIL Ltd. and ‘Iqra AAA (Stable)’ by ICRA Limited. NCDs with such ratings are considered to be highly secure in relation to timely compliance of financial obligations and have the lowest deposit risk.
On Friday, customers bid for Rs 4,700 crore, or 94 % bond, on the first day of the issue’s launch. Further, there are only 300 crore bonds left for retail investors, which will be easily subscribed on 18 January. This NCD of PFC is available in demat format and investors can pay through UPI.
So if you are also planning to invest in it, then let us know what are the debentures and what benefits the investor and the company.
What is a Debenture?
Debentures are a type of debt instrument, unlike equity shares. Through this the government or companies raise funds. The debenture buyer is actually the lender. The company issuing the debentures does not hold anything as a pledge, but buyers buy the debentures in view of their goodwill and reputation. Debenture issuing companies or institutions pay fixed interest to lenders (those buying debentures).
It is important for companies to pay interest.
Companies may not pay dividends to shareholders, but it is mandatory to pay interest to lenders (debenture holders). Treasury bonds or treasury bills issued by the government are also risk-free debentures.
Debentures can be beneficial with FD.
Banks have kept interest rates of fixed deposits (FD) down significantly due to the cut in interest rates by the Reserve Bank of India (RBI). Currently, most banks are offering FDs at the rate of five to six percent. In such a situation, investing in a debenture issue can prove beneficial for you.
There are two types of debentures.
First – Convertible debentures or convertible bonds are bonds that can be converted into equity shares of the issuing company after a predetermined period. These debentures can be fully, partially or optionally convertible. Investors benefit from the interest paid by the company and they also have the option to convert the loan into equity. In this way they can become a part of the company’s growth.
Second – Irrevocable debentures are just regular debentures. That is, they cannot be converted into equity shares of the responsible company. As a result, they typically incur higher interest rates than variable models.