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Yes, its true. You are not dreaming! 8% return every year (actually, pro rata paid every month) by investing in safe haven – Gold! The latest Liquid Gold series 3 from India Infoline is another type of gold investment.
IIFL gold PTC (Liquid gold) review
AA rated, 8% p.a. interest gold loan-backed investment from India Infoline. With 1.6x collateralization. Read more to know what is Pass Through Certificates in India? Benefits & Risks of IIFL gold investment
Product Currency: INR
Product Price: 100000
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As a part of 3rd tranche of IIFL liquid gold series, one more IIFL Gold PTC was launched in Dec 2020. It has already been widely accepted by retail and wholesale investors. After all, who wouldn’t like a 8% return while keeping your investments safe. OK, I agree it’s not completely safe, but it’s safer than direct investment in stock market by beginners.
In this article, I will try to review the IIFL Gold PTC product, a wonderful IIFL gold investment product.
Let’s begin by knowing more about PTC (Pass Through Certificates)
What is a Pass Through Certificate?
Pass Through Certificates or PTCs are high quality debt instrument certificates given to an investor against issuer-owned mortgaged-backed securities. They derive monthly principal and interest payments from a pool of assets owned by the issuer. The interest is paid periodically e.g. 8% annual interest paid monthly.
These PTC can be compared to bonds issued by banks and other AAA rated companies. One big difference between PTC and bond is that PTCs are issued against underlying securities while Bonds themselves are underlying securities. A bond’s value is not derived or dependent on any other financial product.
You can check this investopedia link to read more about PTC
The review of Gold PTC from India Infoline that I promised starts from the very next paragraph.
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IIFL Gold PTC review & features
Very quickly, firstly, I will take you through some features of IIFL gold PTC investment launched as part of IIFL liquid gold series 3.
10 features of IIFL Gold PTC Liquid Gold series 3
- Backed by IIFL gold jewellery loans
- PTC being collateralized by 1.62x of your investment
- 8% Annual interest
- Safe investment – IIFL gold loans sold to 3rd party.
- Demat account + 1-lac min investment
- 3 year maturity with no lock-in
- Credit rating of AA by ICRA
- Managed by catalyst Trusteeship as trustee
- To be listed in BSE
- All except NRI can invest
Following are the top 10 features of the new Liquid gold series 3 from India Infoline. This instrument is a safe, AA rated, BSE-traded, collateralised investment from the house of India Infoline.
Liquid Gold series 3 backed by IIFL gold jewellery loans
The India Infoline gold PTC is an instrument backed by IIFL gold loans. As mentioned in the earlier paragraphs, PTC is an instrument that is issued against underlying securities. In this case, the underlying security here is the batch of gold loans by India Infoline.
The best part in this IIFL gold investment is that the India Infoline gold loans themselves are secured by borrowers’ gold jewellry.
Gold PTC Over-collateralized by 10%
Another benefit is that this Liquid Gold Series 3 from India Infoline is over collateralized by 10%. It means that for every thousand rupees of PTC there are 1,100 rupees of underlying IIFL gold loans.
IIFL gold loans in turn are collateralized 1.33 times. In short, it means that for every 75 rupees of IIFL gold loan, 100 rupees of gold is held as collateral.
Monthly coupon interest at almost 8%
IIFL Gold PTC comes with a higher return potential than Bank fixed deposits. The 3rd tranche of Liquid gold product guarantees a monthly coupon interest at almost 8% per annum (7.72% net payout). Compared to any Bank fixed deposit which currently ranges between 5 to 6%, a gold investment like IIFL Gold PTC easily comes with high earning potential.
A monthly coupon payout means it provides you with a regular income and therefore a higher level of consistency, stability and safety.
IIFL gold loans safe – sold to 3rd party
In case India Infoline goes bankrupt, the Gold PTC investments are still safe because underlying IIFL gold loans are sold to a third party. So your investments will be safe, and the IIFL Liquid Gold will be redeemed even if India Infoline defaults.
Demat account needed for Gold PTC investment
A demat account is needed for investment in this Gold PTC. If you hold an India Infoline demat account, you can possibly invest in less than 1 minute. The minimum investment account is 1 lakh rupees for one unit of IIFL gold PTC certificate.
Gold PTC investment with 3 year Maturity
This PTC from IIFL liquid gold series 3 is a medium term duration instrument with a maturity of just 3 years. Its unlike a long term bond or other fixed income instrument having maturity of around 10 years or more. This helps you feel secure that your money is not locked or in the hands of a corporate house like India Infoline for a long time.
Shorter the IIFL Liquid gold series 3 investment duration, the more secure the investor.
AA rated IIFL gold investment
This IIFL gold investment is a well-rated fixed income instrument with a credit rating of AA by ICRA. As per ICRA, AA rated instruments carry very low risk of default or non payment of financial obligations.
Managed by catalyst Trusteeship
The Gold PTC investment from India Infoline is managed by catalyst Trusteeship as trustee. Catalyst is a well known, highly regarded trust managing multi-billion dollars of debt of various corporate houses. The brand further enhances investor’s trust in IIFL gold investment.
Liquid Gold series 3 is Traded on BSE
This Liquid gold series 3 instrument is held in your demat account and is soon to be listed on BSE as well. All this means that if in some rare event, IIFL defaults and even catalyst trusteeship is not able to recover your money, you will at least be able to sell your IIFL gold investment units in BSE.
Everyone can invest in gold PTC investment
All categories of individuals like retail resident, HUF can invest in this Liquid Gold series 3, unlike previous series. Partnerships, FII registered with SEBI, Mutual funds, and several other types of financial houses are also allowed to invest.
As per regulatory restrictions, non-resident Indians (NRI) are not allowed to invest in IIFL gold PTC
Key risks in IIFL liquid gold series 3
Risk of default
The first risk is credit risk of default of any of the participating companies. Risk of default of iifl, catalyst trust, or the company to whom the IIFL gold loans are sold.
Credit risk of default is the risk of non payment of monthly payouts or the final principle amount.
Gold price falling
Another notable risk in this Liquid gold series 3 is the Risk of gold price plummeting to a far lower price than at present. IIFL has a process to mitigate this risk that continually monitors gold value to loan ratio. It calculates the total exposure of India Infoline to the loan borrower with respect to current gold prices. In short, it checks whether the collateral ratio of 1.33 is maintained or not in IIFL Gold investment.
Payment agent issues
Risk of delay in payments of monthly payouts due to India Infoline servicing agent malfunction.
Disadvantages of IIFL gold PTC investment
The biggest disadvantage of investing in IIFL liquid gold series 3 is that you are not actually investing in gold. You are rather investing in a gold backed fixed income instrument. This means you will get monthly payouts – a stable income – but you will not profit from appreciation in gold price.
Another disadvantage is that the Gold PTC from India Infoline is not a liquid instrument. Even though it will be listed on BSE, it will hardly have any liquidity. Especially when comparing it with relatively more liquid interest rate instruments like Non Convertible Debentures & Bonds listed on stock exchange. Even NCDs of big corporate houses are relatively illiquid compared to Indian government sovereign bonds.
IIFL Gold PTC taxation
The monthly payout income received from your India Infoline Gold PTC units are taxable. They will be added to your income and will therefore be subject to Income tax. Even though you will be buy a securitised asset, you will be taxed as if you had invested in the underlying assets directly.
TDS is applicable on income from Liquid Gold series 3 and the monthly payout will be subject to 25% TDS for all resident investors: both individuals or HUF.
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NOTE: I am not promoting or recommending this Instrument. As an investor, you should read all proposals, terms & conditions and documents carefully before investing. I am just stating the facts about IIFL Gold PTC here. You can verify these facts by investigating using numerous websites on Google.
Top Gold News
If you wish to invest you will have to directly touch base with India Infoline through this page (click the image below to open the IIFL Gold PTC webpage)
Frequently Asked Questions (FAQ)
What is a gold PTC?
A Gold PTC is an instrument which is born from securitization of gold loans. The loans are carefully selected from a pool of borrowers. This pooling and securitizing results in a coupon-paying fixed income instrument with underlying asset being gold loan receivables.
The benefis, risks and other features of a gold PTC are mentioned in detail in this article.
Good investement tip 🙂
Thanks Amit. But just a reminder to go through the risks before investing in this IIFL Gold investment
It is 2nd time I have invested in such scheme, post all deductions returns are just about 2.2-2.5%. The series 3 now 15 months old but no listing is done on BSE. Gold prices and loan interest have increased marginally high but gains are depleting. The RM and Company support in terms of any issue or reports is dismal. I have strong feel of cheating, my postal scheme was better as my poor agent even gives me commission and my interest or capital money comes on time as agreed no here and there at all.