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  #1  
Old 10th March 2011, 02:53 PM
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Default Confused - L&T Finance vs TATA Capital



Hi Senior members.

Need you help:

Which is better considering "current" price (if kept till maturity)?

L&T Finance N5 (Current Price 952 INR) - 8.58% annual payout
or
TATA CAPITAL N4 (Current price 1276 INR) - 12% compounded annually


Please help.
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  #2  
Old 10th March 2011, 05:31 PM
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What are the maturity dates of these two debentures?
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  #3  
Old 10th March 2011, 08:50 PM
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Quote:
Originally Posted by tipto View Post
Hi Senior members.

Need you help:

Which is better considering "current" price (if kept till maturity)?

L&T Finance N5 (Current Price 952 INR) - 8.58% annual payout
or
TATA CAPITAL N4 (Current price 1276 INR) - 12% compounded annually


Please help.
Ignoring tax considerations, neither of them is worth it in the current scenario. Far better to take a Bank FD - you can get a insured FD paying 10% or more.

I tracked the NCD market for a short time. There are very few regular guys in this market. Most of it is bought & sold by institutions who are really not doing this on sentiment. It's wholly done by calculations. So it's very rare you get a bargain.

By the way, I assume you know it, but let me mention it anyway. The Tata Capital N4 has a face value of 1000, so at redemption time you will get only 1000 Rs for each 1276 you paid.

For Alchemist - LTN5 - 08-03-13 & TCN4 - 05-03-14

Both have a face value of 1000.
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  #4  
Old 10th March 2011, 10:48 PM
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Hi,

I tend to disagree here.

How come 12% compounded annually be not worth a look?

I have to buy now and sell after 3 yrs and I would get 1762 (approx) for 1276 that I am paying now?

Can we have the calculations and more facts and actual apple to apple comparison before rejecting these.

Both Tata Capital and L&T Finance are in good shape (not bad at least) and even if the companies go for a toss. NCD holders will get the principal back sooner or later and I do not see these companies vanishing in 3 yrs at least.
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  #5  
Old 11th March 2011, 04:05 AM
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Quote:
Originally Posted by tipto View Post
Hi,

I tend to disagree here.

How come 12% compounded annually be not worth a look?

I have to buy now and sell after 3 yrs and I would get 1762 (approx) for 1276 that i am paying now?
That works out to roughly 10%.

Here you can get 10.25%
Catholic Syrian Bank
And your deposit+interest is insured upto Rs.1,00,000.

Here 10.3%
BharatBank.com

I have FDs at both these banks (and a lot others I booked in the last couple of months - no where will my deposit + interest be more than Rs 1,00,000).

There are a lot of banks offering between 9.5 to 10.5%.

And these are insured deposits.
Quote:
Originally Posted by tipto View Post
Both Tata Capital and L&T Finance are in good shape (not bad at least) and even if the companies go for a toss. NCD holders will get the pricipal back sooner or later and I do not see these companies vanishing in 3 yrs at least.
Irrespective, how good a company looks today, there is always a minor chance of a collapse. If you had asked people 3 years before they collapsed, nobody would have been doubtful about Enron, Lehman, Andersen, Bear Stearns or Worldcom. They all looked as good or better than Tata Capital or L&T Finance.

I would surely take a risk, but not for anything less than 2-3% more. I tracked NCDs for sometime but never found a 2-3% margin over an insured deposit.

Anyway, it's your call.

Quote:
Originally Posted by vinvest View Post
The Tata Capital N4 has a face value of 1000, so at redemption time you will get only 1000 Rs for each 1276 you paid.
Correcting my earlier post. I was wrong on this - I didn't pay attention to the compounded.

But my point still stands, it's not worth it.

Last edited by vinvest : 11th March 2011 at 04:12 AM.
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  #6  
Old 11th March 2011, 09:56 AM
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Quote:
Originally Posted by vinvest View Post
For Alchemist - LTN5 - 08-03-13 & TCN4 - 05-03-14

Both have a face value of 1000.
In case of L&T Finance N5, the semi-annual interest payouts would be 42.9, 42.9, 42.9 and 92.9 (adding 50 more as the face value is 1000).

The yield comes out to somewhere around 10.5%.

(I assumed the interest is reinvested at around 9% and a transaction cost of 1% on the buy side).

Many banks are offering interest rates of around 9.5% for 2-3 year deposits. Thus, I don't think L&T Finance's NCD is attractive enough.

Similarly for Tata NCD, if one gets 1762 from 1276 after 3 years, the yield would be 12.5%.

However, there is a call option at the end of 36 months and I guess that is why the NCD is trading at such a high yield. Tata Capital has the right to buyback the NCDs if it feels it can borrow funds at lower rates.
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  #7  
Old 11th March 2011, 12:35 PM
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Here are some points which can be considered:

1. Do not wish to open anymore accounts.
2. Smaller banks do not have presence in smaller cities and even metro very rare to find.
3. NCD is listed and could be sold anytime (the cumulative one - N4 Tata cap). Premature withdrawal in case of FD means penalty and less interest.
4. 10.5% compounded (TATCAP N4) mean 12.55% SI per year.
5. Crash of 2008 was once in 100 yrs kind of situation. We do not expect and want any such worst economic crisis daily. .
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  #8  
Old 11th March 2011, 02:54 PM
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Quote:
Originally Posted by Alchemist View Post
In case of L&T Finance N5, the semi-annual interest payouts would be 42.9, 42.9, 42.9 and 92.9 (adding 50 more as the face value is 1000).

The yield comes out to somewhere around 10.5%.

(I assumed the interest is reinvested at around 9% and a transaction cost of 1% on the buy side).

Many banks are offering interest rates of around 9.5% for 2-3 year deposits. Thus, I don't think L&T Finance's NCD is attractive enough.
Fully agree.

Quote:
Originally Posted by Alchemist View Post
Similarly for Tata NCD, if one gets 1762 from 1276 after 3 years, the yield would be 12.5%.
Bank FD's also compound. Add Rs. 10 commission on 1276 it becomes 1286. If you compound 1286 quarterly for 3 years at 9.5%, you get 1705. Again not at all attractive.

And forget small banks, it's easy to get 9.5 % today even at a big bank.
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  #9  
Old 14th March 2011, 01:30 PM
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Thanks vinvest and sachin for your comments and suggestions. Really appreciate.
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