Wednesday, March 18, 2009

12% TATA Capital Non Convertible Debenture:


When TATA Capital Ltd ( Group company of TATA & Sons) raised a NCD issue to the tune of 1000 Crores, many investors raised their eyebrows. Some did bet that all NCD's trade at a discount when listed on the stock market.


We believe that the coupon rate ( interest percentage) of the issue is crucial in deciding whether the issue trades at a discount or at a premium. Hence a NCD at 6% interest may trade at steep discount and a 12% NCD can trade at a sizable premium.


12% TATA Capital NCD is no exception. It got listed yesterday and closed at Rs.1032 (Vs issue price of 1000). Today it closed at Rs.1046.


Luckey investors who invested and got allotment (plz check your Demat where it is credited) are now free to sell the NCD at a premium if they want. Otherwise they can stay invested to enjoy the 12% interest paid on annual basis.


The success of TATA Capital NCD is likely to pave way for many more NCD's in the Days to Come. Be choosy in picking good quality NCD.


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