What are the main benefits of LAS?
The main benefit of LAS is access to liquidity without needing to liquidate your investments / portfolio / stake. LAS is an easy tool to leverage on your existing assets without compromising on the superior returns they offer.
What are the various purposes that LAS can be used for?
The purpose of LAS is to take care of all your investment as well as personal needs and to help you meet your contingencies.The loan can be availed for increasing promoter's stake in the company, warrants conversion, subscribing to rights issues, equity infusion in other business and general corporate purpose.
An unexpected liquidity crunch can be mitigated with LAS, which is a relatively quicker and easier source for liquidity.
LAS can also be used to expand a portfolio. Financing can be availed against an existing investment in shares to reinvest in the stock market.
Purchase property, expand business or to meet other financial objectives.
Does the ownership of shares get transferred when I pledge the shares with you?
No, the ownership of the shares is retained by the customer.
In whose name would the shares be held? Will I keep getting dividends on the pledged shares?
The shares remain in the borrower’s name enabling him/her to continue reaping the benefits of the portfolio and enjoy all shareholder benefits such as rights, dividends and bonuses.
What is the Approved List of Shares?
This is the list of shares/securities approved by Aditya Birla Finance against which loan can be availed subject to predefined hair cut or margin. Aditya Birla Finance has approved more than 600 shares. This list is subject to change from time to time.
Can I get an overdraft facility against my shares?
Yes, a line of credit facility which grants the borrower flexibility in the use of funds can also be availed. Interest is charged only on the amount actually utilized and not on the entire facility.
What are my loan tenure options?
Loans can be availed either as demand loans or with a fixed tenure. Demand loans are for a tenure of 1 year and are renewable solely at the discretion of ABFL. Term loans can be for any tenure greater than 1 year.
What security / collateral do I have to present for the loan?
Pledge of approved securities – shares, mutual funds, insurance policies and corporate bonds, is required as security for the loan.
Can I avail the loan against unlisted shares?
Yes, but ABFL will evaluate it on a case by case basis.
What is the minimum margin that I have to maintain?
As per RBI norms, a minimum 50% margin must be maintained on shares. For other types of collateral, margins range from 15% to 35%.
How often are the shares re-valued?
The portfolio is monitored on a daily basis based on the closing market price. Any margin shortfall, as per RBI norms, must be recouped within 7 days.
Can I prepay the loan? What are the charges involved?
Yes, the loan can be prepaid. Please note that prepayment charges may be applicable. To know more about the charges, contact your Relationship Manager / Customer Service Desk.
What happens when the market value of the security changes?
If the market value drops to a level where the minimum margin is less than stipulated, the borrower must recoup the margin by pledge of additional shares or by cash margin/part-repayment. If the market value rises, then assuming eligibility as per decided sanction limit, a borrower can take an additional disbursement.
What are the interest cost and other charges applicable?
Please contact Customer Service Desk or your Relationship Manager for the current rates applicable. All loans sanctioned for a period greater than 3 months will have an interest reset clause. Interest will be reset at the end of every 3 months on the basis of discussions with the borrower. All fees and other charges are communicated, prior to entering into the loan transaction, through documentation shared.
In ESOP Financing, will ABFL fund the entire amount required to exercise the options?
ABFL applies a margin or haircut value to the shares being given before extending a loan.ABFL will fund lower of the amount required for exercise (incl. perquisite tax) and the market value of collateral given (after applying the applicable haircut). In the situation that the amount that can be funded by ABFL is inadequate to fund the entire amount required, the employee will have to bring in the balance amount by way of cash/shares. However, in case the vesting price is significantly lower than the market price, you may be able to avail of 100% funding for exercising your options.
The following questions and answers are provided for general information only and may not be completely accurate in every circumstance, do not purport to be legal/ commercial advice, and are not intended to be binding on ABFL. ABFL shall have right to change them from time to time. Each case would be reviewed independently and the FAQs will have no binding effect on ABFL.