High Yield Debt

Structured Finance

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 opportunity.

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
Investor Syndication:

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.

Key Features
  • 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.
Key Benefits
  • 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.