India Infoline Finance Limited (IIFL) Redeemable, Non Convertible Debentures (NCD)
Overview
India Infoline Finance Limited (IIFL) is offering redeemable, non convertible debentures (NCD’s). Issue starts on 5-Sep-12 and ends on 18-Sep-12. Is this a best investment option ?
What is India Infoline’s Finance Limited business ?
India infoline Finance Limited is a subsidiary of India Infoline Ltd. The Company is engaged in the activity of mortgage financing, loan against securities, gold loans, margin funding and other consumer financing products.
What are the issue Details ?
The issue is for Unsecured – Non Convertible debentures (NCD’s) with a face value of ₹ 1,000 per NCD with a minimum subscription of 5 NCD’s, minimum subscription amount would be ₹ 5,000. The issue size would be ₹ 250 crores with an option to retain additional subscription of ₹ 250 crores. The interest would be paid monthly, annually or cumulative. Below are the interest rates and the period is 6 years (72 months).
Monthly Annually cumulative
Coupon interest p.a. 12.75% 12.75% 12.75%
Effective yield p.a. 13.52% 12.75% 12.75%
Benefits
- The amount invested would be doubled in 6 years with annualized compounded interest offered by IIFL which is one of the good investment option
- Crisil and ICRA have giving the grading as AA-Stable. This grade is in line with other NCD issues (e.g. Shriram transport Finance co. NCD’s issued in Jul-12). It indicates that the investment security with high probability of meeting the financial payment obligations.We can look for such high grade ratings for best option for investments.
- The company has a mortgage loans of 45% of its total loans and gold loans of 40% of its total loans which accounts to 85% of business. Since these segments are expected to grow in future, the company prospects are looking good.
- These bonds would be listed in NSE and BSE, hence in case you want to sell them, you can exit early.
Risks
- These NCD’s are unsecured. This means in the event of any unforscene thing happening to the company and NCD claims to be made to company; we would not be first person in the queue. Secured debenture holders, creditors would be in the first queue. However NCD holders would be given preference for payment comparing to share holders. As of 31-Mar-12, there are approx 14%+ loans are unsecured in this company.
- Recently RBI move towards controlling and monitoring the financial institutions that provide loans against gold , may impact IIFL business in future.
Conclusion: There are several bond issues which has started coming up like Shriram Transport Limited etc. and others are on the way. Secured bonds are the best investment options compared to unsecured bonds. In case you are tempting towards the interest rate offered by IIFL, you can invest small amount in IIFL as an investment option. It is not just the interest that matters, but you need to look for safe investments. Best investment option not only provides best return on investment, but also secures the capital. You also need to check in which tax bracket you would be falling. If you are in 30% tax bracket, your effective yield would be less, since TDS would be deducted from the interest.
Readers, what is your opinion on investing in bonds? Do you feel this as one of the best investment options and safe investments?
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Suresh
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