This debt product outperforms all high-return fixed deposits with an interest rate of 9.7%

Non-convertible debentures (NCDs) worth Rs 1,000 crore are being offered for the first time by Motilal Oswal Financial Services. The offering consists of a base issuance of Rs 500 crore and a green-shoe option of Rs 500 crore to retain oversubscription.

Subscriptions for the debt offering will be accepted from April 23 to May 7, 2024. Both the BSE and NSE will list the NCDs.

The coupon rate on the NCDs will vary depending on whatever series investors choose, from 8.85% to 9.70%. The tenors of the NCDs will vary from 24 to 120 months. Interest will be paid by the corporation on a monthly, yearly, or cumulative basis. Institutional investors will get 10% of the issue size, non-institutional investors 10%, HNIs 40%, and retail investors 40%. The final distribution will be made according to the “First Come, First Served” rule.

The debt instrument in the Series 5 category of NCDs, which has a duration of 60 months or 5 years, will have an effective yield of 9.35% and a coupon rate of 8.97%.

A yield is the real return an investor receives from the debt instrument over the course of a year, whereas a coupon rate is the announced interest rate due annually.

The Financial Services of Motilal Oswal NCDs goal: The business will pay down its outstanding debt and cover its working capital needs using at least 75% of the profits from NCDs. An additional 25% will be used for basic business needs.

The NCD issuance has been assigned a rating of IND AA/Stable by India Ratings and Research, and CRISIL AA/Stable by CRISIL Ratings Ltd.
Debt instruments with these ratings are seen to have a high level of safety when it comes to meeting financial commitments on schedule.

Note: Investors should make their own decisions on this; this rating is not a recommendation.

Tenors and coupon rates: For tenors of 24 months, 36 months, 60 months, and 120 months, respectively, the firm is providing coupon rates of 8.85%, 9.10%, 9.35%, and 9.70%.

The Financial Services of Motilal Oswal Fixed Deposits vs. NCDs
The 10-year NCD with a 9.7% annual percentage rate wins out high-paying fixed deposits by a wide margin. Small financing banks have the highest rates on fixed deposits of any bank category.

Suryoday Small Finance Bank is now providing general clients with a fixed deposit (FD) interest rate of 8.25% p.a. for a five-year term, in the scheduled small finance bank category. Senior people are eligible for an additional 0.5% interest on the same-term FD.