We are launching Non Convertible Debentures (NCDs) in collaboration with Arthmate (arthmate.com), where the funds will be used to source the capital needs of Bharat Pe platform to fund their borrowers. The NCDs will provide an attractive rate of returns and shorter maturity period the money will be used to provide the business loan to the merchants of Bharat Pe and there is a FLDG agreement with Bharat pe which will protect arthmate against NPAs.
What is FLDG (First Loan Default Guarantee): Through this arrangement, in case there is an NPA, the first hit is always taken by the originator. It is an assurance that players sourcing loans have some skin in the game and aims to ensure that borrower quality is not diluted.
The proceeds received from the Arthmate will be used to provide business loans to the merchants of Bharat Pe. The loan will be given to the merchants on the basis of their daily average transaction, Business volume and after doing a proper due diligence, generally there is a loan tenor of 1-90 Days and money will be received through EDI (Equated daily installments) basis.
|Instrument||NCDs – Mamta Projects Pvt Limited (Arthmate|
|Issue Size||Rs. 2 Crore|
|Interest payment cycle||Monthly|
|Issue Open Date||12-July-2021|
|Issue Close Date||20-July-2021|
|Minimum Investment||Rs. 2 Lakh|
|Mode of Purchase||Dmat & Physical|
|Maximum Number of Investors||49|
|Utilisation of Money||Funding to Bharat Pe platform borrowers|
|Security||FLDG (First Loan Default Guarantee) Agreement With Bharat Pe|
|Allotment||First come first basis|
|Liquidity||There is no liquidity of the investment before the maturity date. The entire amount of investment will be repaid by issuer on the maturity date|
Interest income will be taxed under the head of “ Income from other sources” and the tax rate will be applicable as the individual tax slab of an investor.
There will be no capital gain or Loss in these NCDs if the investors have invested till maturity of the instruments.
There are following risk factors are involved with this NCD issue
|Type of Risk||Description||Whether Applicable to this issue|
|Credit Risk||Risk of default by an issuer of debt securities||Yes|
|Interest Rate Risk||Risk of volatility in yields due to change in rates by central bank||No|
|Liquidity Risk||Risk of investment not being liquidated before maturity||No|
Note: The loans provided by the Issuer are unsecured and if the Issuer is unable to control the level of, nonperforming loans (“NPAs”) in the future, or if the loan loss reserves are insufficient to cover future loan losses, the financial condition of the Issuer and results of operations may be materially and adversely affected.
However, the FLDG agreement may help the investors to mitigate the risk of NPAs to the originator of loan and to ensure the good credit quality.