Can I add TATA CAPITAL SECURED NCD

POSTED BY Rajendran ON October 21, 2010 8:06 am COMMENTS (5)

I have 5L which I mobilized to apply for SBI bonds as they didn’t offer online I didn’t apply. I am thinking of buying the TATA CAPITAL NCD from the open market what is ur take on this.

I am planning to buy TATA NCD option 4 (commulative), coupon rate for this is 12% and its currenlty trading @ 1261. It was offered at 1000 rupees during March 2009.

call option for this scheme is after 36 months so I have another atleast 15 months to go in case if TATA CAPITAL decided to exercise the call option.

Note:

  I already hold 100 units of TATA NCD Option 3.

 

5 replies on this article “Can I add TATA CAPITAL SECURED NCD”

  1. bharat shah says:

    @manish chauhan
    it is not to answer the query, but related to tata capital ncd option 4 mentioned in the querry. while searching for information of listed ncd, i come across a research report on ‘tata capital ncd’ by one site/blog ‘profitshastra.com’ dtd.21 may, 2010. as per the report, on or @21 may, 2010, the yield at current price of rs.1228/- to maturity on dt. 5 march,2014 worked out 5.37% p.a. .further it compared with bank f.d.rate 7.5% and opined costly. i puzzled that in the query, if @rs.1261/- after 4-5 months the same ncd seems fetching more than 9%p.a., how it could be 5.37% p.a. at @1228 at that time. i think ,5.38% is errorneous, though 9% may not be exactly correct. what does your caculation show? this is only to correct, if i am wrong, as i am making my mind to buy tata ncd option 4 from market.

  2. bharat shah says:

    @rajendran,one answer of your question would be , this market is more irrational than rational, or everybody’s rational differs! as such, the return difference considering the expense may not be that great, and i think, if people wants to buy such papers with good rating in big quantity from the market, its rates would increase, and yield may come down just in line with that of sbi bond, or even lower. i found that the quotes of such papers are not readily available.

  3. Rajendran says:

    @Bharat.. Thanks for the number crunching…

    I too did the number crunching (Thanks to Manish for providing me the formula in one of his blog) and I see that one can get return of 9.6% by purchasing the NCD 4 series even if they exercise the call option and one can get around 11% in case if they exercise the call option.

    My question: This being the case, why there is mad rush for SBI bonds???

    Note:
    I tried to do all these calculations just because I couldn’t able to apply for SBI bonds is it like even others applied for the issue b’coz they are not aware or don’t what to evaluate the TATA CAPITAL NCD?

    can some expert explain the rational behind the huge subscription?????

  4. bharat shah says:

    i don’t know the product except the name tata inspires safety. whereas your return would be @ 9.5% to 10.25 till competion of 36 months. then if they did not exercise caa option, it would be 12%. this is without taking tax angle in consideration.

  5. bharat shah says:

    i don’t know much about the product, but on the figures, it seems its maturity value would be rs.1410 if compounded yearly or rs.1420 if compounded half yearly. on that basis , if you pay now rs.1261, your rate of return would be 12% or 13% for 15 months i.e.@9.6 to10.40%. if they don’t exercise call option, your return would increase to 12%. i think , on face of these calculation, it would no be bad, if the investor is falling tax bracket. securitywise tata name inspires safety.

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