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Investment in NCD IPO and listed bonds with Zerodha - Process, Brokerage

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Investment in NCD with Zerodha

Can we buy NCD with Zerodha? No, Zerodha does not offer NCD IPO investment facility however, one can buy listed NCDs through Zerodha Kite.

When a company issues NCDs to the general public, it is called an NCD IPO or a public issue of NCDs. If you have an account with Zerodha, you cannot buy NCD public issues directly. Instead, you can apply for an NCD NFO (New Fund Offers) through your bank’s ASBA facility.

NCDs are fixed-income-bearing debt instruments issued by companies to raise capital. The issuing company makes a regular interest payment on NCDs at a specified coupon rate and at maturity, the investor gets back the principal along with the interest. Once NCDs are listed on the stock exchange, you can buy and sell NCDs on the secondary market on Zerodha Kite.

Before we proceed, let us first understand what an NCD IPO means.

What is NCD IPO?


Like equity IPOs, a company can also sell its debt securities to the general public to raise capital. NCDs or non-convertible debentures are debt instruments that cannot be converted into shares. Companies that issue NCDs pay regular interest to investors, either monthly or annually. At the end of the term, the principal is repaid together with the interest. Thus, NCDs offer a higher return than PPFs (Public Provident Funds) and Bank FDs.

NCDs are debt instruments that do not represent ownership in the company, whereas equity shares signify an investor’s stake in the company. A company can offer an IPO of shares only once, but it can issue NCD IPOs multiple times. NCDs are issued for a fixed term and the interest rate is known in advance.

NCD Features


  • The minimum investment amount for public NCD issues is Rs 10,000.
  • Investors receive periodic interest income at a fixed coupon rate for NCD.
  • Zerodha does not offer NCD IPOs.
  • You can apply for NCD public issues through the ASBA process.
  • One can invest in NCD IPO online through UPI with GoldenPi by using Zerodha demat account details.
  • One can make NCD IPO applications via UPI mechanism for a maximum of Rs 5 lakh.
  • NCDs can be traded (bought and sold) on the stock exchange after listing.
  • NCDs have a fixed term or maturity but an investor can sell them in the secondary market on the stock exchange before maturity.
  • NCDs are listed in the N series as N1 to N9 and NA to NZ.
  • NCDs are not a risk-free instrument as the interest payment depends on the creditworthiness of the company. NCD issues from companies with high credit ratings are successful.

Zerodha NCD IPO Apply Online through ASBA


At Zerodha, you cannot directly invest in NCD public issues, however, you can buy NCD IPOs with your bank’s ASBA IPO facility using Zerodha Demat account details. ASBA (Applications Supported by Blocked Amount) is a facility offered by Self-Certified Syndicate banks (SCSBs) to apply for IPOs, buybacks, rights issues, and NCDs using your net banking account.

Once you apply for NCD IPO using ASBA net banking online, the NCD IPO application amount gets blocked in your bank account till the allotment. Once allotment is out, either funds will be debited or unblocked based on whether you got the NCD allotment or not.

Before you apply in an NCD IPO, you must check the company’s credit rating by top rating agencies like CRISIL, ICRA, etc. NCDs with good ratings like AAA and AA are considered safer than less rated securities.

Steps to apply in NCD IPO through ASBA net banking:

  • Log in to your bank’s net banking portal.
  • Search for the IPO option.
  • A list of open NCDs, IPOs, and RIs will be displayed.
  • Search for the NCD, you want to apply in and tap on Apply / Invest option.
  • Enter details like the number of NCDs, frequency of interest payment, etc.
  • Enter your Zerodha Demat account details like DP ID, Demat account number.
  • Submit the order.

Once you have applied, your bank account will be blocked for the IPO application amount. On allotment, if you receive the allotment, NCDs will be credited to your Zerodha Demat account or in case of non-allotment, amount will be released back for use.

NCD IPO Apply Offline


If you do not find the NCD IPO in the ASBA net banking option, you can invest in NCD IPO offline by submitting a physical form. Here is the process:

  1. Download the NCD IPO application form from the stock exchange or the company’s website.
  2. Take a print out of the NCD IPO e-form.
  3. Fill in the required details in the NCD IPO form, including applicant’s name, PAN card, date of birth, etc.
  4. Provide your Zerodha demat account details i.e. DP ID (CDSL or NSDL) and demat account number.
  5. Specify the number of NCDs to be applied for and your bank account details.
  6. Sign the application form and submit it to any of the specified banks.

Trading in Listed NCDs with Zerodha


Once NCD IPO is listed on the stock exchange, they are traded on the secondary market. NCDs are tradable instruments that are traded on the exchange in the same way as shares.

Can NCDs be traded with Zerodha? Yes, you can buy and sell listed NCDs on Zerodha Kite in the same way you trade stocks. However, NCDs are less traded instruments compared to stocks and hence have lower liquidity.

How to buy NCDs with Zerodha?

  1. Log in to your Zerodha trading account on Kite.
  2. Search for the listed NCDs in the search bar on the Kite Watchlist.
  3. You can find the NCD symbol on the NSE website to search in Zerodha.
  4. Add it to your kite watchlist.
  5. Tap on the Buy option.
  6. Enter the quantity or number of NCDs you wish to buy.
  7. You can place a market order (buy NCDs at the market price) or a limit order (buy NCDs at a specific price).
  8. Tap on the buy option.
  9. Once the NCD buy order is executed, it will be displayed on the Positions tab on kite and will be credited to your demat account in T+1 day.

Zerodha NCD Brokerage Charges


Zerodha users can trade in listed NCDs. They can make both intraday as well as delivery trades in NCDs in the same way as in shares. There is no brokerage fee for investing in NCDs with Zerodha. This means that you can do free delivery trading (cash & carry trades) in NCD. NCDs have a T+1 settlement cycle i.e. debentures bought today through kite will be credited to your demat account in Zerodha on the next business day. However, a flat brokerage of Rs 20 is charged for NCD intraday trades.

End Note


NCDs are the best investment option for risk-averse investors as they offer better returns than FDs with slightly higher risk. At Zerodha, you can trade or invest in listed NCDs just like equity trading. Investing in NCDs offers you fixed interest returns and also helps you diversify your portfolio to manage overall risk.

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FAQs

You can find listed NCDs in Zerodha Kite in the search bar option on the watchlist. Simply type the NCD security symbol and the instrument will be visible. All Listed NCD instruments are visible in N series. For instance, Motilal Oswal Financial Services NCD issue’s symbol is 97MOFSL34 – N7.

 

 

No, Zerodha discount broker does not offer investment in NCD IPO. Thus, new public issue of NCDs cannot be purchased with Zerodha.

Instead you can apply through your bank or invest directly from the company’s website. You can also purchase NCDs from other platforms like GoldenPi or TheFixedIncome using your Zerodha Demat account details.

All allotted NCDs will be displayed in your Zerodha Demat Account.

 

 

You can sell NCDs in Zerodha once it gets listed on the exchange. Here is how to sell NCD in Kite Zerodha;

  1. Log in to your Zerodha Trading Account on Kite.
  2. Go to Holdings Tab.
  3. Tap on Sell option.
  4. Enter the quantity and price.
  5. Click on sell and the order will be placed.

 

 

Yes, though NCDs have a specific maturity period say 1 year and the capital invested will be repaid on the expiry of maturity period.

However, if you want to sell NCD before maturity, you can sell them in the secondary market. If you have bought NCD IPO using Zerodha Demat account details, you can sell them on Kite.

 

 

Yes, NRIs are also allowed to buy and sell listed bonds with Zerodha.

RBI permits non-resident Indians to invest in NCDs subject to the condition that the NCD issuer company must allow NRI to participate in NCD. If the company itself does not allow NRIs, it cannot buy NCDs with Zerodha or any other platform as well.

 

 


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