9.2% Indiabulls Commercial Credit NCD Sep 2018 – Should you Subscribe?
About Indiabulls Commercial Credit Limited
They are a non-deposit taking NBFC registered with the RBI and a 100% subsidiary of one of the largest housing finance companies ("HFCs") in India. They are also a notified financial institution under the SARFAESI Act. They focus primarily on long-term secured mortgage-backed loans. They offer loans against the property to its target client base of salaried and self-employed individuals and small and medium-sized enterprises. They also offer mortgage loans to real estate developers in India in the form of lease rental discounting for commercial premises and construction finance for the construction of residential premises. As of March 31, 2018, mortgage loans constituted 98.21% of its AUM.
Features of Indiabulls Commercial Credit NCD Sep 2018
Issue start date: 11-Sep-2018
Issue end date: 28-Sep-2018
NCD’s are available in 7 series/options. It offers NCD for 2 years, 3 years, 5 years and 10 year tenure.
Coupon interest rates are between 8.8% to 9.2%.
Under Series I to Series VII of NCD Holders, Retail investors would get 0.1% additional interest rate compared to other investors.
These are Secured Redeemable NCDs.
Interest payable monthly, yearly and on maturity depending on the option chosen by the NCD investor.
The 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.
The base issue size is Rs 1,000 Crores with an option to retain over-subscription up to Rs 2,000 Crores.
Edelweiss Financial Services, A.K. Capital Services and Axis Bank are Lead managers to the issue.
Interest rates of Indiabulls Commercial Credit NCD Sep 2018
How the NCD issue is allocated to various investors?
1) Retail Portion – 40% of the issue
2) HNI – 40% of the issue
3) Qualified Institutional Portion – 10% of the issue
4) Corporate Portion – 10% of the issue
What are the credit ratings for these NCDs?
The Secured NCDs have been rated by Crisil as CRISIL AAA/Stable.
The Secured NCDs have been rated by CARE as CARE AAA/Stable.
When Indiabulls Commercial Credit NCD Sep 2018 is proposed to be listed on stock exchanges?
The NCDs are proposed to be listed on BSE and NSE. The NCDs shall be listed within 12 Working Days from the date of the Issue Closure.
How is the company doing in terms of profits?
Its consolidated profits are as below:
Year ended Mar-2016 – Rs 50.55 Crores
Year ended Mar-2017 – Rs 58.56 Crores
Year ended Mar-2018 – Rs 254.9 Crores
Indiabulls Commercial Credit NCD Sep 2018 – How the returns taxed?
For investors who are applying through demat account, there would not be TDS deduction.
Income tax on interest would be based on individual tax slab. Means, irrespective of whether company deducts TDS or not, you should show the interest income on your income tax return and pay necessary income tax.
Why to invest?
1) This company is one of the fast growing NBFCs in India with strong financial performance, capitalization and credit ratings. It has access to diversified and cost effective funding sources
2) The company is earning consistent and improving margins in the last few years. This indicates that this company has ability to consistently pay the interest rates for its creditors or NCD holders.
3) These NCDs offer attractive interest rates where you can get yield up to 9.2% per annum.
4) It issues Secured NCDs. In case of any non performance of the company and the company gets closed for some reason, NCD investors would get preference in repayment of capital along with interest. Hence it is safe to invest in such secured NCD options. However, it is only preference is given to NCD investors and no guarantee that entire amount would be paid-back in such cases.
Why not to invest in Indiabulls Commercial Credit NCD Sep 2018?
1) High levels of customer defaults and the resultant non-performing assets could adversely affect their business, financial condition, results of operations and future financial performance
2) Its business has been growing consistently in the past. Any inability to manage and maintain its growth effects may have a material adverse effect on its business, results of operations, financial condition and cash flows.
3) As at March 31, 2018, mortgage loans constituted 98.21% of their’s AUM. Any adverse development in the real estate sector would adversely affect its results of operations.
4) Its top 20 borrowers have an exposure of 16.68 % of its total advances as on March 31, 2018. Its inability to maintain relationships with such customers or any default and non-payment in future or credit losses on its single borrower or group exposure where they have a substantial exposure could materially and adversely affect its business, future financial performance and results of operations.
5) They are vulnerable to the volatility in interest rates and we may face interest rate and maturity mismatches between its assets and liabilities in the future which may cause liquidity issues.
6) It is subject to supervision and regulation by the RBI, as an NBFC-ND-SI, and other regulatory authorities and changes in the RBI's regulations and other regulations, and the regulation governing its
7) Company or the industry in which they operate could adversely affect its business their’s inability to comply with observations made by the RBI or any adverse action by the RBI may have a material adverse effect on its business, financial condition and results of operations.
8) The financial industry is becoming increasingly competitive and their’s growth will depend on its ability to compete effectively
9) Any downgrade in its credit ratings may increase interest rates for refinancing its outstanding debt, which would increase its financing costs, and adversely affect its future issuances of debt and its ability to borrow on a competitive basis
10) A decline in their’s capital adequacy ratio could restrict its future business growth.
11) Other Internal and external factors can be read at the risk factors of the NCD prospectus.
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How to apply these Indiabulls Commercial Credit NCD Sep 2018?
Indiabulls Commercial Credit NCD Issue of September 2018 is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. For more information on this you can refer prospectus.
Should you subscribe in Indiabulls Commercial Credit NCD of 2018?
Indiabulls Commercial Credit Limited is offering secured redeemable NCDs now in 2018. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. While banks are showing some signs of interest rates increase, the interest rates are still between 6% to 7.5% per annum, which are low compared to interest rates offered by these NCDs. Considering high interest rates and secured NCD’s in nature, one can consider investing in these NCD’s after assessing risk factors indicated above. However, one should invest in them only for short to medium term of 2 to 5 years. Don’t go for long term NCDs of 10 years as we do not know how the company would perform in the long run.
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Indiabulls Commercial Credit NCD Sep 2018 Review
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