Advertisement

HindustanTimes Fri,24 Oct 2014

Debentures turn hot, but mind the risks

Sachin Kumar, Hindustan Times  Mumbai, September 12, 2012
First Published: 21:09 IST(12/9/2012) | Last Updated: 02:25 IST(13/9/2012)

Upset that bank fixed-deposit rates are coming down, eroding the earning power of your savings?

Advertisement

Corporate debentures - bonds that carry interest - can come to your rescue, offering attractive returns, often with the additional comfort of a dematerialised holding that makes managing them easy.

Debentures can be convertible, where the bonds become shares. But the attractive substitutes for FDs are non-convertible debentures (NCDs). But the credit rating they carry are important, as they signify the degree of risk you bear. http://www.hindustantimes.com/Images/Popup/2012/9/13_09_Biz1.jpg

Several companies have hit the market to directly tap retail savings.

Among them are Muthoot Finance, Shriram City Union Finance and Religare Finvest which have launched NCDs that offer 11.50% to 12.25% interest on investments for three to five years.

"NCDs are good options to diversify your debt portfolio," said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.

"Its good idea for retail investors to invest for longer periods (2-3 years) as fixed deposit rates of banks have started declining," he said.

Surya Bhatia, principal consultant, Asset Managers said: "Investors should go for a secured issue rather than an unsecured one and always prefer NCDs with higher ratings given by rating agencies."

Shriram City Union Finance debentures opened for subscription on September 12, while those of Muthoot and Religare Finvest will open for subscription on September 17 and September 14, respectively.

Increasingly, investors prefer to hold debentures in demat form.


Advertisement
more from Business

Three major nations absent as China launches World Bank rival in Asia

Australia, Indonesia and South Korea skipped the launch of a China-backed Asian infrastructure bank on Friday as the United States said it had concerns about the new rival to Western-dominated multilateral lenders.

markets
Advertisement
Most Popular
Advertisement
Advertisement
Copyright © 2014 HT Media Limited. All Rights Reserved