InvestorQ : Can I get some expert view on whether the L&T Finance non convertible debenture is worth investing or not?
Dilmini Mercia made post

Can I get some expert view on whether the L&T Finance non convertible debenture is worth investing or not?

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AR Kadam answered.
8 months ago

L&T Finance has AAA rating from multiple credit rating agencies and good management of L&T House which is considered to be more stable in the given volatile debt market.

L&T Fianance NCD is offering Interest rate in the range of 8.45% p.a. to 8.65% p.a. over tenure ranging from 36 months to 84 months which also seems to be attractive compared to the Interest Rates offered by similar tenure FDs and other available options in the market.

You may consider to invest post analyzing your the taxability depending on investors income and investors existing portfolio exposure to debt and other such securities. Please contact your financial advisor before taking final decision.

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Dhwani Mehta answered.
8 months ago

Here are some basic points you need to know about the L&T Finance NCD issue before taking a decision.

· The issue will be open for subscription between December 16 and December 30

· The interest rate on the NCD has been set at an attractive range of 8.45% to 8.65%

· The lowest tenure of the NCD is 36 months where a retail investor will receive 8.45% interest. For 60-month tenure, the interest rate is 8.6%, and for 84 months, the NCD offers 8.65%.

· All NCDs will have a face value of Rs.1000 and will be redeemed at par. The minimum investment in the NCD issue will be Rs.10,000.

· In terms of credit risk L&T Finance has triple-A or AAA rating from multiple credit rating agencies. For that rating, the yields are certainly attractive

What should be your investment decision? Frankly, FDs at the above rates are not too attractive because there is lock-in, limited liquidity and the interest is fully taxable at your peak rate of tax. You could be better off investing in a 3-year debt fund which can give you higher yields and also benefit if the yields go down in the market. Also debt funds are a lot more liquid and risk is much lower. You need to enter this FD with caution.