Navy Finserv, one of the players in the world of digital personal loans, has come up with a new non-convertible debenture. Team Sanchay is examining what kind of ‘credit challenge’ and ‘credit strength’ this special instrument has.

First, some important information:

1. NBFC or Non-Banking-Financial Services Company
2. Rating: ‘A’ (CRISIL has given this rating)
3. Interest rate: 10.40% (annual)
4. Maturity date: February 13, 2025

Face value: Rs 1,00,000

5. Listing, i.e. trading on the exchange is possible
6. Key “strengths”: It is believed to have sufficient capitalization, the promoters have brought in Rs 3,000 crore of their own capital, and the profile of the lenders is good and diversified.
7. Key “Challenges”: Unsecured lending conditions, potential for lower return on assets.
   According to the authorities of Navy Finsard, customers of modern financial services can benefit from digitalization. The use of technology in retail loans is going well these days – they believe that this trend will increase further in the future.

Points to know along with this:

Retail investors can decide to buy these NCDs, but the amount of their allocation will depend on the risk profile (and surplus on hand) and other conditions.
a. Customers will have to provide their KYC information. Demat account
b. Holders will have to submit it with the Client Master List (CML).

Addition of savings:

Like every time, this time too we would like to specifically say that one should also pay attention to the rating. We believe that one should not buy bonds/debentures only by looking at the rate (i.e. interest rate). We have written about such fixed income options many times in the past. If there is a possibility of default, it should be avoided. However, it is right to judge it by looking at the characteristics of the bond itself. It is also better to examine the qualities of the promoters and the business information of the concerned company. A lot of information is available in the exchange sources these days, and the average investor can find all these details with a little effort. When a portfolio has a high equity or commodity content, it is considered that it is necessary to invest partially in bonds for diversification reasons. In this case too, it is not right to be an exception.