Wint Wealth will introduce Senior Secured Bonds in a publicly listed structure tomorrow (25th November 2021) on its platform. Investors would be able to invest as little as Rs 10,000 in these bonds and earn monthly interest. As much as 33% of the principal will be repaid every 9 months, giving a reinvestment opportunity to investors and reducing credit risk. According to Wint Wealth, this will be India’s first public issue bond backed by a cover pool of property loans worth Rs 68 crore, which is 1.25x the issued bonds which reduces the risk aspect.
Ahead of the launch of the new public issue from Wint Wealth, FE Online caught up with Anshul Gupta, Co-Founder at Wint Wealth, to understand the new product and who should invest in it. Excerpts
What are Senior Secured Bonds? And why is it named like this?
A senior secured bond is one that is backed by a pool of security, such as gold loans, automobile loans, or property loans. In a senior secured bond, the term “senior” denotes that bondholders have first priority to be repaid if the NBFC defaults. If the bond-issuing NBFC fails to make a payment, the entity will be forced to file for bankruptcy, which will be governed by the applicable laws and regulations that protect the investor interest.
What kind of investors should invest in Senior Secured Bonds? What are the minimum and maximum investment caps?
All Wint Wealth assets are democratized to make the debt landscape into bite-size investment instruments. The Senior Secured Bonds introduced by Wint Wealth enables retail investors to invest in fixed income assets with as low as Rs. 10,000. This gives them a chance to test the Debt and Bond market waters before deciding to invest more or not.
An ideal investor would be one who falls in the 30% tax bracket and is looking at investing around Rs. 50k to Rs. 1.5 Lakh. In terms of maximum investment, we recommend that Wint Wealth assets account for no more than 15% of your whole portfolio. Furthermore, this 15% should be spread across at least 5-6 assets from different NBFCs. In other words, only put 1-2 percent of your whole portfolio into each asset and diversify your risk accordingly.
How will Senior Secured Bonds generate returns for investors?
Normally NBFCs raise funds through Equity or Debt. They raise money in the market so they can lend money on higher rates for business loans, and more. After operational charges is when these NBFCs get their net profit. So typically it’s not the Senior Secured Bonds that earns the returns here but the money that is raised by NBFCs by expanding their loan book to earn interest and raise capital.
What is the expected return on investment? And, is it guaranteed? If not, what are the possible risks of investing in these bonds?
Wint Bricks Nov21 is providing 10.5% XIRR interest on a monthly basis. You will get 33% principal repayment every 9 months till 27 months.The returns on the assets are XIRR returns, which are computed in the same manner that debt mutual fund returns are generated, i.e. using the XIRR method to calculate an annual compound interest rate when interest is given back to you on an annual basis.
These Senior Secured bonds are designed with features such as an exclusive charge on the underlying security pool, amortisation over the security pool’s collateralisation, and strict covenants. While Wint wealth works towards mitigating the risk by verifying the individual loans in the pools, there is still a high risk factor involved. The three broad risks with this type of investment are – Credit Risk, Liquidity Risk and Fraud Risk thus there is no guarantee on the returns.
How to invest in these bonds?
On the launch day (November 25th), go to the Wint Bricks Nov21 website and click Invest Now (the button will be where the “Notify Me!” button is now), and we’ll walk you through the rest. Simply use the Scrip Code that we will provide once you click on Invest Now to look for the bond on your broker account. Ensure that the funds you desire to invest are pre-loaded into your broker account.
As Wint Bricks Nov’21 is a publicly listed bond, it will be searchable and visible through the following brokers: Upstox, ICICI, HDFC, 5paisa, Axis, Edelweiss, Zerodha, Upstox, ICICI, HDFC, 5paisa, Axis, Edelweiss.
How do Senior Secured Bonds compare to other options like FD, debt mutual funds?
While Wint Wealth assets give higher returns compared to debt mutual funds, the risk associated is higher as well. A benefit while investing with Wint Wealth is the taxation, these assets are taxed like equity (STCG and LTCG). Still, we encourage investors to diversify their investment among Wint assets to mitigate risks.
How has Wint Wealth’s previous covered bond issues performed?
The 1st maturity of assets where we have completely repaid investors was in February this year. The other previous covered bond based assets on the platform are performing well with no downgrades and defaults. The next asset maturity is due in June 2022.