Why investing in NCD IPOs is beneficial for retail investors— explained
Non-Convertible Debenture (NCD) IPOs. Investors must understand NCD IPOs and how they differ from equity IPOs. NCDs are corporate debt instruments similar to bonds, but unlike bonds, they cannot be converted into equity shares.
They offer investors a safer and more stable investment opportunity, along with a consistent income flow. According to Abhijit Roy, CEO, GoldenPi, investors find NCDs appealing due to their high yields, which often outpace bank FD rates by a considerable margin. With many NCDs boasting comfortable ratings, they offer a reliable investment opportunity.
“The minimum investment quantum for NCD IPOs is ₹10,000 making it a strong retail product. This serves as a good channel for Institutions to raise debt capital from the retail segment. Typically, NCD IPOs come with a maturity period of 5 years, and the interest rates vary depending on the credit rating.
For instance, an AAA-rated NCD IPO might offer a competitive interest rate ranging between 9% and 10% while lower-rated NCDs with A ratings will offer around 12%," said Abhijit Roy. "NCDs consistently offer higher yields compared to Government securities (G-secs), Public Provident Funds (PPF), and bank Fixed Deposits (FDs), making them an attractive choice for investors seeking dependable returns. This short-term investment avenue with promising returns appeals to investors aiming for quick gains.
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