9.4% Reliance Home Finance NCD Dec 2016 – Should you invest?
Reliance Home Finance NCD Dec 2016 – Should you invest?
Couple of months back, Indiabulls Home Finance Limited NCD issue offered 9.15% annualized yield. Now it the turn for Reliance Home Finance NCD Dec 2016. Reliance Home Finance NCD 2016 would open for subscription on 22nd December, 2016. Reliance Home Finance Ltd NCD offers both secured NCD’s and Un-Secured NCD’s. How good is Reliance Home Finance NCD issue 2016? What are the positive features of Reliance Home Finance NCD Issue December 2016? What are the risk factors to be considered if you want to invest in Reliance Home Finance NCD’s?
About Reliance Home Finance Limited
Reliance Housing Finance Limited a non deposit taking housing finance company registered with the NHB and focused on providing financing products for the LMI to HMI segment in India, primarily in Tier II and Tier III cities and towns and focused on the self employed. It has been active in the housing finance sector in India since 2009. It is a wholly owned subsidiary of Reliance Capital Limited, the financial services Company of the Reliance Group.
The Company is a part of the Reliance Group which is one of India’s prominent private sector business houses serving over 2,500 lakh customers across telecommunications, power, financial services, infrastructure, media and entertainment, and healthcare sectors. Its Promoter, RCL has interests in asset management and mutual funds; life and general insurance; commercial and home finance; equities and commodities broking; wealth management services; distribution of financial products; asset reconstruction; proprietary investments and other activities in financial services. RCL is a constituent of CNX Nifty Junior and MSCI Global Small Cap Index and is listed on NSE and BSE.
The Company also has robust marketing and distribution network, with a presence across 100 locations through 43 branches, throughout India as at September 30, 2016. Its branches aims at providing a fast and seamless customer experience with emphasis on a single window interface for the customer.
Features of Reliance Home Finance NCD Issue 2016
Issue start date: 22-Dec-2016
Issue end date: 6-Jan-2017
NCD’s are available in 4 options. Option I to III is for secured NCD’s and Option IV is Unsecured NCD’s.
Interest payable annually every year.
NCD’s are offered for 3, 5, 10 and 15 years options.
Secured NCD’s are offered for 3, 5 and 10 years options.
Unsecured NCD’s are offered for 15 years option only.
Face value of the NCD bond is Rs 1000.
Minimum investment is for the 10 bonds. Means, you need to invest for a minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
These NCD bonds would be listed on BSE/NSE. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
Secured NCD’s are rated as CARE AA+ by CARE and BWR AA+ by BWR indicating stable outlook.
Un Secured NCD’s are rated as CARE AA by CARE and BWR AA by BWR indicating stable outlook.
Relaince Home Finance is planning to raise Rs 1,000 Crores with this issue with an option to retain another Rs 2,500 Crores totaling to Rs 3,500 Crores.
Draft Prospectus can be downloaded this link.
Interest rates for Reliance Home Finance NCD Dec 2016
How is the company doing in terms of financials?
Total operating income has grown from Rs 501 Crores in FY15 to Rs 769 Crores in FY16 indicating a yoy growth of 59%.
Net income has grown from Rs 184 Crores in FY15 to Rs 260 Crores in FY16 indicating a yoy growth of 41%.
Profit after Tax (PAT) has grown from Rs 69 Crores in FY15 to Rs 87 Crores in FY16 indicating a yoy growth of 26%.
Why to invest?
The company is earning consistent profits. There would not be issue of payment of interest at regular intervals.
Attractive interest rates. It offers yield of 9.4% for un-secured NCD’s and up to 9.15% for secured NCD’s.
It offers Secured NCD. In case of company performance is down and the company gets closed, investors of secured NCD would still get repayment of interest and principal amount.
Why not to invest?
Its business has been growing consistently in the past. Any inability to maintain our growth may have a material adverse effect on our business, results of operations and financial condition.
Its business is particularly vulnerable to volatility in interest rates.
Any increase in the levels of non-performing assets in its loan portfolio, for any reason whatsoever, would adversely affect its business, results of operations and financial condition.
They regularly introduce new products for our customers, and there is no assurance that its new products will be profitable in the future.
As a HFC, they face the risk of default and non-payment by borrowers.
Any such defaults and non-payments would result in write-offs and/or provisions in its financial statements which may have a material adverse effect on its profitability and asset quality.
They are subject to periodic inspections by the NHB. Non-compliance with the NHB’s observations made during any such inspections could adversely affect its reputation, business, financial condition, results of operations and cash flows.
They are party to certain legal proceedings and any adverse outcome in these or other proceedings may adversely affect its business.
Other Internal and external factors can be read on page no. 11 of the NCD prospectus.
How the NCD’s are allocated?
NCD’s would be allocated to following investors on a first come first serve basis.
Qualified Institutional Investors – 30%
Corporate Investors – 10%
High Networth Individual Investors – 30%
Retail Individual Investors – 30%
How to apply these Reliance Home Finance NCD Issue 2016?
Reliance Home Finance NCD Issue of 2016 is available in physical form as well as demat form. You can apply online with any of the broker where you are maintaining a demat account. For more information on this you can refer 1st page of the prospectus.
Conclusion: These Reliance Home Finance Limited NCD’s offer secured and un-secured NCD’s. While unsecured NCD’s carry high risk, investors can invest in Secured NCD’s which offer upto 9.15% yield. These useful especially for low tax bracket individuals. Alternatively you can invest in debt mutual funds which offer tax efficient investment option. Investors can stay away from unsecured NCD’s which are high risk and the tenure is for 15 years.
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