Tata Power offers 7.5% on five-year NCDs; here's how they compare with bank FDs

Tata Power Company Ltd. has raised ₹1,500 crore through the issuance of Non-Convertible Debentures (NCDs) carrying a 7.50% annual coupon, offering fixed-income investors returns that are higher than those available on many bank fixed deposits (FDs).

The Tata Group power utility allotted 1,50,000 NCDs of ₹1 lakh face value each through a private placement approved by its Committee of Directors on July 14, 2026. The debentures have a five-year tenure and will be listed on the Wholesale Debt Market segment of BSE.

According to the company, the NCDs are unsecured, senior, redeemable, rated, listed, taxable and non-cumulative. The coupon rate was discovered through the multiple yield allotment method on BSE's Electronic Book Building Platform on July 13.

How do Tata Power's NCDs compare with bank FDs?

The 7.50% coupon offered by Tata Power is higher than the interest rates offered by many public sector and private sector banks for comparable deposit tenures.

For example, Central Bank of India offers up to 6.00% on five-year fixed deposits, Bank of India offers 6.00%, Federal Bank offers 6.40%, YES Bank offers 6.75%, while IndusInd Bank offers 6.65%.

However, some small finance banks continue to offer higher returns. Suryoday Small Finance Bank offers up to 7.90% on five-year deposits, while Jana Small Finance Bank offers 7.77% and Unity Small Finance Bank offers 7.50% for select tenures. 

Tata Power NCD issue at a glance

Particulars	Details
Issuer	Tata Power Company Ltd.
Issue size	₹1,500 crore
Type of issue	Private Placement
Number of NCDs	1,50,000
Face value	₹1,00,000 per NCD
Coupon rate	7.50% per annum
Tenure	5 years
Nature	Unsecured, senior, redeemable, rated, listed, taxable, non-cumulative
Listing	Wholesale Debt Market Segment of BSE

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What are NCDs?

NCDs are fixed-income debt instruments issued by companies to raise long-term capital. Investors lend money to the issuer and receive a fixed rate of interest for a specified tenure. Unlike convertible debentures, NCDs cannot be converted into equity shares.

Listed NCDs can be traded on stock exchanges before maturity, allowing investors to exit early if buyers are available in the secondary market.

NCDs versus fixed deposits

Although both NCDs and fixed deposits generate predictable returns, they differ on several parameters.

Bank FDs generally offer greater safety as deposits of up to ₹5 lakh, including principal and interest, are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Investors can also withdraw funds before maturity by paying an applicable penalty.

In contrast, NCDs are not covered by deposit insurance. Since Tata Power's latest issue is unsecured, repayment depends on the company's financial strength and creditworthiness rather than any underlying asset. Investors looking to exit before maturity typically need to sell the debentures on the exchange, where liquidity may vary.

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Interest earned on both NCDs and bank fixed deposits is taxed according to the investor's applicable income tax slab.

For investors seeking potentially higher fixed returns, listed corporate NCDs can be an attractive alternative to traditional bank deposits. However, unlike FDs, they involve issuer credit risk and market liquidity considerations, making it important for investors to evaluate the company's credit profile, ratings and investment objectives before investing. 

Five-year FD rates vs Tata Power NCD

Institution	5-year return (% p.a.)
Tata Power NCD	7.50%
Suryoday Small Finance Bank	7.90%
Jana Small Finance Bank	7.77%
Unity Small Finance Bank	6.75%*
YES Bank	6.75%
IndusInd Bank	6.65%
Federal Bank	6.40%
Bank of India	6.00%
Central Bank of India	6.00%

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