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Amid high inflation, low FD rates, here’s an opportunity to get 10% annual return

Amitava Chakrabarty
inflation, interest rate, bank FD, bank fixed deposit, FD rates, income tax, purchasing power, secured NCD, redeemable non-convertable debenture, JM Financial Products Limited

With the rising rate of inflation exceeding the decreasing interest rates on bank fixed deposits (FDs) raising serious concerns about erosion in purchasing power on maturity of the FDs, JM Financial Products Limited, a subsidiary of JM Financial Limited and a Non-Banking Finance Company (NBFC), has launched Tranche III Issue of secured, rated and listed, Redeemable Non-Convertible Debentures ("Secured NCDs").

While the rate of return after paying tax on FD interest would fall below 5 per cent, the JM Financial NCDs would provide investors effective pre-tax yield of up to 10 per cent per annum.

JM Financial is a company having a diversified product and has kept the face value of its Secured NCDs at Rs 1,000 each with a base Issue size of Rs 100 crore with an option to retain oversubscription up to Rs 200 crore aggregating up to Rs 300 crore, which is within the Shelf Limit of Rs 2000 crore.

Ratings – [ICRA] AA (Stable) by ICRA Limited and CRISIL AA/Stable by CRISIL Limited– indicate high degree of safety regarding timely servicing of financial obligations

The Tranche III Issue has got ratings of [ICRA] AA (Stable) by ICRA Limited and CRISIL AA/Stable by CRISIL Limited-that indicate high degree of safety regarding timely servicing of financial obligations.

The issue is scheduled to close on Monday, March 9, 2020 with an option of early closure or extension as decided by the Board of Directors of the Company ("Board") or the NCD Public Issue Committee constituted by the Board.

"JM Financial Products has strengthened its position across business verticals with a diversified product mix. The Company has a debt / equity of 2.4x and has maintained strong liquidity buffers. We will continue to focus on risk adjusted profitable growth. This public issuance shall help us to further diversify our borrowing and investor mix," said Vishal Kampani, Managing Director, JM Financial Products Limited, (also MD, JM Financial Group).

The following table shows the issue structure of the Secured NCD:

Secured NCDs, JM Financial Products Limited