InCred Money launches 1.5x Nifty Accelerator MLD, offering principal protection with 0-14% return

InCred Money, the retail wealth-tech arm of InCred Group, has today launched InCred 1.5x Nifty Accelerator MLD on its platform for investors looking to participate in India’s equity story along with principal protection. This is the company’s second Market Linked Debenture (MLD) offering after its first launch in August 2023.

The issue opens on February 7 and closes on February 29. The 1.5x Nifty MLD provides a return equivalent to 1.5 times (150%) of the Nifty 50 Index returns, capped at a maximum of 33% total returns at maturity in April 2026 (26 months).  In addition, the MLD offers 100% principal protection at maturity which ensures investors' initial investment remains secure. The product has a credit rating of Crisil PP-MLD A+ with ‘Stable’ Outlook. 

The InCred 1.5x Nifty Accelerator MLD is issued by InCred Financial Services Limited (IFSL). InCred attained unicorn status in December 2023 and has recorded a Profit Before Tax (PBT) of Rs 298 Crore for the period Apr-Dec 2023. 

It's crucial to understand the associated risks. It invests 80% of your money in debt of the issuer and 20% in call options.  Moreover, the returns of MLDs are contingent upon the performance of the underlying market benchmark, typically featuring a minimum return (floor) and a maximum return (Cap). Additionally, there exists the risk of the underlying return surpassing the cap. Nevertheless, principal protected MLDs serve to mitigate market risk, ensuring no loss even in the event of significant downturns in the underlying asset. “The returns in the InCred MLD range from 0% to 14% based upon market returns. Investors should not consider this as a debt instrument as the returns are linked to equity markets, " said Mrin Agarwal Founder of FinsafeIndia, a wealth management firm.

“Indian equity markets are near all-time highs and investor interest is still very strong. This is the time when one needs to evaluate their portfolio from a risk-return perspective. With 100% principal protection on the downside and 1.5 times of Nifty 50 returns on the upside at maturity, the MLD will help you stay invested in the stock market with confidence. The ‘Anytime Liquidity’ feature on the InCred Money platform also offers flexibility and convenience when managing your investments,” said Vijay Kuppa, CEO of InCred Money. It charges 2% for early withdrawals.

MLDs, or Market-Linked Debentures, represent hybrid instruments issued in the form of bonds, with returns or interest contingent upon the performance of an underlying market benchmark. Common examples of these benchmarks include the Nifty 50 Index, Nifty 100 Index, and 10-Year G-Sec Index, among others. MLDs come in two primary types: Principal Protected and Non-Principal Protected. Principal Protected MLDs ensure that the invested principal remains fully protected at maturity, thereby mitigating downside risk. This implies that irrespective of any negative returns on the market benchmark, investors receive their entire principal amount back at the end of the maturity period.

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So, how exactly do MLDs function? When an investor opts for an MLD, their investment amount is divided into two components: the Debt Component and the Market-Linked Component. The Debt component experiences growth akin to a typical corporate bond, while the Market-Linked Component is allocated to instruments such as Call Options, offering variable equity-linked payouts. The combined value of these components constitutes the total value of the MLD upon maturity. 

MLDs can be structured in various ways, encompassing different underlying indices, tenors, and structural variations. Some MLDs lean towards a more debt-oriented (conservative) approach, while others strike a balance, and still, others skew towards being more equity-oriented (aggressive). Consequently, investors should carefully assess their risk appetite before making investment decisions. A debt-oriented MLD might be preferable for those seeking diversification from equities, while equity-oriented MLDs cater to investors seeking exposure akin to equity markets.