Structured Finance practice is driven by a unique market opportunity in India where
growth capital for mid-market organizations is either restricted to pure debt (Bank
Funding) or equity capital (PE/Secondary Markets). Both forms of capital have their
own limitations and thus Mezzanine/Bridge financing for such organizations provide
an optimal capital structure solution. From an investor point of view, it is quite
attractive by being a low volatile, short duration and high yielding investment
Karvy Capital’s Investment Strategy:
- Evaluating and zeroing on the sector, based on the current business environment
for mezzanine/bridge financing
- Selecting the company based on the above and other micro analysis viz. Excellent
Management team with proven track record, sound business plan and reasonable financials
- Understanding the need of funds and suitability check for structured financing and
matching the same with investor appetite
- Appointing reputed third party to conduct due-diligence and independent cash-flow
estimation for the period money is infused
- Structuring the deal with term sheet and detailed covenants protecting the interest
of the investors
A thorough investor syndication program is run for raising the capital which include
road shows and other investor end activities
Our Investors :
Our investor community is diversified and constitute of HNW and Ultra HNW clients,
NBFCs and Corporate Treasuries.
Real Estate NCDs'
Real Estate NCDs are Non-Convertible Debentures that provide debt to developers
through a structured debt instrument which adds value in the early stages of development.
Such structures are used to raise short-term secured loans from investors. The developer
in-turn ensures a regular flow of income to the investor through monthly/quarterly
interest pay-outs. Unlike convertible debentures, NCDs cannot be converted to equity
shares of the issuing company at a future date. Hence the return offered by them
is relatively higher.
- Investors typically gets a fixed coupon in the range of 12%-18% with a fixed
payout frequency - monthly or quarterly
- RE-NCDs have a fixed tenor of 2-4 years. The principal is paid back to the
investors at fixed intervals after some moratorium
- The Real Estate Developer at all times have to maintain a minimum security cover
- in the range of 2-3 times of the total amount being borrowed
- The size of the NCD issues is fixed which may be divided in to multiple series
of various sizes.
- Developers usually have an option to prepay the amount raised through Real
Estate NCDs with a nominal prepayment penalty.
- Higher returns than Bank FDs and Corporate FDs
- Give a security cover for our investment
- Steady flow of income to investor through regular interest payouts
KARVY has undertaken many Real Estate NCD issues with issue size ranging from 10cr
-35cr across India
Cautionary note for Investors
Real Estate NCDs are relatively high risk products. There is a risk of delay in
interest and or prinicipal payment by the developer, security enforcement in dire
situation could be a long drawn and cumbersome process.