Indian non-banking financial companies (NBFCs) have been rather busy of late. July and August witnessed a slew of non-convertible debentures (NCDs) being offered to investors with a few on the way. It has helped that August was a washout for equities. Investors, repulsed by the downturn, have gleefully accepted the prospect of high yields offered on newly minted NCDs. This post casts a bird's eye view on the NCD space, without treating any particular issuer specifically. The discourse is devoted to NCD investment appraisal and to ascertain the suitability of positioning in the senior pieces of the capital structure. Central Hypothesis Most primary issues, at offered yields, are unattractive on an after-tax basis relative to other available fixed-income options. Bank fixed-deposit rates over a 3-5 year tenor (the typical NCD maturity profile) compare well on risk-adjusted return. The other rationale for ignoring these issues in the primary market is the prospect of purch...
"Thus, at the court, both great and small; Behave alike, for all ape all." - Jonathan Swift, The Logicians Refuted