Skip buyback offer, hold on to Piramal Cap NCDs: Advisers


Mumbai: Wealth advisors said retail investors need not participate in Piramal Capital and Housing Finance’s voluntary offer to buy back non-convertible debentures (NCDs) worth ₹2,000 crore. Investors got these securities as a part of DHFL’s merger with Piramal.

With the NCDs being serviced by a strong group and yield at 10.75%, investors must hold on to these securities, said wealth advisors.

“It does not make sense to sell this secured AA-rated paper at a discount. Other comparable AA-rated papers in the market would yield between 9-9.5%, while this one yield 10.75%,” said Deepak Punjwani, head-debt at GEPL Capital.

Piramal Capital and Housing Finance (PCHF) is looking to buy back two crore debentures with a face value of ₹950. Investors, who wish to participate in the buyback, can submit their NCDs by December 16. In case of oversubscription, the repurchase shall be done proportionately.

“Investors should hold on to this NCD because, at the current yield of 10.75% for a secured NCD, they earn 150-250 basis points compared to other AA-rated papers,” said Anup Bhaiya, CEO of Money Honey Financial Services. Bhaiya said an AA-rated fixed deposit by

offers 7.8% to senior citizens for a tenure of 36 months.

These secured NCDs with an ‘AA’ rating were issued by Piramal in consideration towards the assignment and transfer of DHFL’s debt from its creditors.

Issued in September 2021, they have a tenure of 10 years and pay a coupon of 6.75% semi-annually and mature on September 26, 2031. As per the structure of the NCD, the company will repay 2.5% of the principal once every six months for the first five years. Between the sixth and the tenth year, 7.5% of the principal will be repaid every six months.

Currently, the NCD has a face value of ₹950 and the company proposes to buy it back at ₹823.28, giving a yield of 10.75%.

“Given the strength of the promoters and availability of periodic cash flows due to return of principal every six months, makes it a good investment option,” said Punjwani.

Some analysts are recommending investors participate in the buyback and deploy the proceeds elsewhere.

“Investors who are feeling stuck as a part of a forced deal and want to recover their earlier investments in DHFL NCD can use this window instead of waiting for 10 years,” said Amar Ranu, head-investment products at Anand Rathi Shares.

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