Motilal Oswal Financial Services is offering up to 9.7% on its latest bond issue. Should you invest?
Motilal Oswal Financial Services Ltd (MOFSL) is tapping the bond market to raise up to Rs1,000 crore from non-convertible debentures (NCDs). The bond issue, the first of its kind from Motilal Oswal that offers investors interest of up to 9.7%. opened on 23 April and is set to close on 7 May. The issue is secured and redeemable, rated AA/stable by Crisil Ratings and India Ratings.
There are eight series of the NCDs with a tenure of 24 months, 36 months, 60 months, and 120 months offering 8.85%, 9.1%, 9.35% and 9.7%, respectively. The company is offering annual, monthly and at maturity interest options.
At 9.7% interest rate, the offering from a big entity like MOFSL is attractive but retail investors should take a decision based on their tax slab, said Feroze Azeez, deputy CEO, Anand Rathi Wealth. “This 9.7% is a 2.75% spread from government securities, or G-Secs, which is quite aggressive. It's an attractive proposition for those in the lowest tax bracket. However, for those in the 30% tax bracket, taking this concentrated credit risk is not advisable. These investors will get a 100-125 basis point better net of taxes return, which is not worth the risk," he said.
Retail investors should take note that the highest yield of 9.7% is offered on 10-year tenure, which, experts say, is too long and best be avoided. “Investors should not get attracted to high interest rate long-term debt as anything can go wrong with private companies," said Azeez.
Anshul Gupta, co-founder and CIO, Wint Wealth, said the 2-year, 3-year and 5-year tranches look investible but are better suited for institutional investors and high net worth individuals (HNIs). “For retail investors, small finance banks offering fixed deposits (FDs) with
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