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What is the Interim Finance Bond for retail investors launched by LegalPay?

Litigation funder LegalPay has launched Interim Financing Bonds for retail investors. The bonds will be available to retail investors through the LegalPay platform for a minimum investment of Rs 10,000 and provide attractive returns.

LegalPay acts as an interim financier investing in commercial litigations and insolvent companies. In a statement, the fintech firm said that in a statement that the first-of-its-kind Interim Financing bonds are fixed-income instruments to finance the expenses of the companies undergoing the Corporate Insolvency Resolution Process (CIRP).

“The Interim Financing Bonds will allow retail investors to diversify their portfolios on LegalPay’s platform and enjoy the benefits which were only available to the ultra HNIs before. Retail investors can invest in such bonds with a minimum investment of Rs 10,000 and have an extraordinary coupon rate of 14% giving investors an opportunity to reap substantial profits,” the statement said.

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The issue size of the Interim Finance Bonds is over Rs 3 crore with a credit rating of BBB. LegalPay said that the bonds have undergone a “stringent due diligence and risk assessment process with asset cover of 100x.”

“Opening such investments to retail investors will act as a step towards democratising equity markets investing and providing diversification benefits to retail investors. Retail investors usually have access only to traditional securities, primarily listed equities or fixed deposits,” Kundan Shahi, CEO of LegalPay said.

Shahi further said there has been a spurt in the emergence of different kinds of Corporate bonds in India with the overall market pegged at around Rs 11,500 crore. Corporate bonds provide higher and safer returns to investors and LegalPay is the first platform to provide Interim financing bonds.

“These bonds will open up another investable asset in the potential basket for retail investors. This helps them gain exposure to a level of risk which lies between the risk present in listed equities or fixed-rate investments. This is a very imperative step to have efficient markets,” Shahi said.

How LegalPay works

Companies undergoing insolvency require funds to remain afloat and cover their day-to-day expenses. Although, during the time of insolvency, the company is run by a resolution professional who has limited or no funds. Therefore, resolution professionals require funds to maintain the maximum value of assets and pay salaries and wages to workmen and employees, professionals, etc. Such finance is raised by resolution professionals in the form of interim finance during the corporate insolvency resolution process. This is where LegalPay steps in with interim financing funds, which help the resolution professional in running the operations and process efficiently.

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As interim Finance is a part of the corporate insolvency resolution costs, it is given priority at the time of repayment. “Therefore, the investments provided in the form of interim finance are guaranteed first-priority status and backed by IBC Code,” said LegalPay.

According to the statement, LegalPay holds over Rs 2500 crore in claims under management in various litigations in different jurisdictions across India. The fintech firm has provided interim finance across different sectors such as manufacturing, hospitals, real estate, post-production houses, malls, etc.

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