DRHP LensRetail NCD issues sell on coupon. The prospectus is where you find out what the coupon is paying you for. Read it as a lender would.
1. Credit rating, outlook and rationale
A rating is mandatory for a public NCD issue. Read the rating letter and the agency's press release, not only the symbol. Note the outlook (stable, negative, watch), the key rating sensitivities, and whether the rating was recently downgraded or is under watch.
2. Secured or unsecured, and security cover
Check whether the NCD is secured, what the security is (receivables, immovable property), the minimum security cover the issuer commits to, and the debenture trustee's role. Unsecured and subordinated NCDs rank behind secured lenders.
3. Borrowing profile and repayment history
Look at total borrowings, the mix of bank, NCD and commercial paper funding, asset-liability maturity, and any disclosed defaults, delays or restructuring. For NBFCs, read gross and net NPA trends and capital adequacy.
4. Covenants and options
- Call options let the issuer redeem early, which shortens your tenure if rates fall.
- Put options let you exit early; check the conditions.
- Financial covenants and events of default tell you what triggers acceleration.
5. Litigation and regulatory actions
As with an IPO, read the outstanding litigation section, especially actions by the RBI, SEBI or tax authorities against the issuer and its promoters.
6. Objects and on-lending
NBFC issues usually state that a large share of proceeds will be used for onward lending and repayment of existing borrowings. Check how much goes to general corporate purposes.
DRHP Lens reads NCD shelf prospectuses and information memoranda as well as DRHPs, flags defaults, rating actions and qualifications, and cites each to a page. For equity issues, start with how to read a DRHP.
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Analyse a documentFrequently asked questions
What is an NCD prospectus?
It is the offer document for a public issue of non-convertible debentures, governed by the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021. Frequent issuers use a shelf prospectus with a tranche prospectus for each issue.
Is a secured NCD risk-free?
No. Secured means there is security over assets, held for investors by a debenture trustee. Recovery still depends on the value of that security and how quickly it can be enforced.
What should I check first in an NCD prospectus?
The credit rating, its outlook and the rating rationale; whether the NCD is secured and the security cover; the issuer's borrowing profile and any past defaults; and the call and put options that can change your actual tenure.
This guide is general education about how Indian offer documents are structured. It is not investment advice or a recommendation to subscribe to any issue. Regulations change; always read the current offer document and the SEBI regulations it refers to, and consult a SEBI-registered investment adviser before you invest.