Before we proceed, let us first understand what an NCD IPO means.
Like equity IPOs, a company can also sell its debt securities to the general public to raise capital. NCDs or non-convertible debentures are debt instruments that cannot be converted into shares. Companies that issue NCDs pay regular interest to investors, either monthly or annually. At the end of the term, the principal is repaid together with the interest. Thus, NCDs offer a higher return than PPFs (Public Provident Funds) and Bank FDs.
NCDs are debt instruments that do not represent ownership in the company, whereas equity shares signify an investor’s stake in the company. A company can offer an IPO of shares only once, but it can issue NCD IPOs multiple times. NCDs are issued for a fixed term and the interest rate is known in advance.
The minimum investment amount for public NCD issues is Rs 10,000.
Investors receive periodic interest income at a fixed coupon rate for NCD.
You can apply for NCD public issues through the ASBA process.
One can make NCD IPO applications via UPI mechanism for a maximum of Rs 5 lakh.
NCDs can be traded (bought and sold) on the stock exchange after listing.
NCDs have a fixed term or maturity but an investor can sell them in the secondary market on the stock exchange before maturity.
NCDs are listed in the N series as N1 to N9 and NA to NZ.
NCDs are not a risk-free instrument as the interest payment depends on the creditworthiness of the company. NCD issues from companies with high credit ratings are successful.
Once you apply for NCD IPO using ASBA net banking online, the NCD IPO application amount gets blocked in your bank account till the allotment. Once allotment is out, either funds will be debited or unblocked based on whether you got the NCD allotment or not.
Before you apply in an NCD IPO, you must check the company’s credit rating by top rating agencies like CRISIL, ICRA, etc. NCDs with good ratings like AAA and AA are considered safer than less rated securities.
Steps to apply in NCD IPO through ASBA net banking:
Log in to your bank’s net banking portal.
Search for the IPO option.
A list of open NCDs, IPOs, and RIs will be displayed.
Search for the NCD, you want to apply in and tap on Apply / Invest option.
Enter details like the number of NCDs, frequency of interest payment, etc.
If you do not find the NCD IPO in the ASBA net banking option, you can invest in NCD IPO offline by submitting a physical form. Here is the process:
Download the NCD IPO application form from the stock exchange or the company’s website.
Take a print out of the NCD IPO e-form.
Fill in the required details in the NCD IPO form, including applicant’s name, PAN card, date of birth, etc.
Specify the number of NCDs to be applied for and your bank account details.
Sign the application form and submit it to any of the specified banks.
Once NCD IPO is listed on the stock exchange, they are traded on the secondary market. NCDs are tradable instruments that are traded on the exchange in the same way as shares.
Search for the listed NCDs in the search bar on the Kite Watchlist.
Add it to your kite watchlist.
Enter the quantity or number of NCDs you wish to buy.
You can place a market order (buy NCDs at the market price) or a limit order (buy NCDs at a specific price).
Frequently Asked Questions
Enter the quantity and price.
Click on sell and the order will be placed.
Can NCD be sold before maturity?+
Yes, though NCDs have a specific maturity period say 1 year and the capital invested will be repaid on the expiry of maturity period.
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