India Infoline Finance NCD Jan 2019 – Should you invest?
India Infoline Finance NCD Jan 2019 Review
India Infoline Finance NCD for Jan 2019 (IIFL Finance NCD) Tranche-I would open for subscription on 22nd January, 2019. It is issuing secured + unsecured NCD’s in this Tranche-1. The yield is as high as 10.5% per annum. India Infoline Finance has a good credit rating from Brick Works Ratings and Crisil. Currently banks are offering low interest rates and investors are looking high interest rate NCD’s. Should you invest in India Infoline Finance NCD of Jan 2019? What are the hidden factors an investor should consider before investing India Infoline Finance NCD of 2019? In this article, I would provide some interesting insights about India Infoline Finance Ltd NCD.
About India Infoline Finance Limited
India Infoline Finance Limited (IIFL) is a Systemically Important RBI registered non deposit taking Non-Banking Financial Company (NBFC-ND-SI). It is a subsidiary of IIFL Holdings Limited, a listed company, which holds a 84.50 % stake. The UK based CDC group holds a 15.4 % stake in IIFL. Fairfax India Holdings Corporation’s (FIHC) wholly-owned subsidiary FIH Mauritius Investments Ltd holds 26.53% in IIFL Holdings Limited as of 30 Sep 2018. The company is engaged in consumer financing and the mortgage finance business. IIFL has a strong distribution network of 1378 branches across India and offers products like Home loan, Gold loan, Commercial Vehicle loan, Small and Medium Enterprise loan, Capital Market loan, Construction & Real Estate loan, Digital Finance, Loan Against Property and Microfinance. IIFL has 2 subsidiaries viz. IIFL Home Finance Ltd (IIHFL) (100%) and Samasta Microfinance Ltd (97.37%).
India Infoline Finance NCD Jan 2019 Issue details
India Infoline Finance is issuing secured, un-secured sub-ordinated, redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 250 Crores with an option to retain another Rs 1,750 Crores over subscription totaling to Rs 2,000 Crores. It comes with 6 different options, which contains 39 months, 5 years and 10 year tenure.
About India Infoline Finance Jan 2019 Unsecured NCD
They are offering secured and unsecured NCD’s now for Jan 2019. For un-secured NCD the assets are NOT backed up for principal and interest. In case something happens to company performance and company is closed, investors would be given normal preference in repayment of capital and interest.
Features of India Infoline Finance NCD of Jan 2019
Issue start date: 22-January-2019
Issue end date: 20-February-2019
NCD’s are available in 6 different options.
The interest of these NCDs is payable monthly, yearly and on maturity.
The face value of the NCD bond is Rs 1,000.
Minimum investment is for 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 and NSE. Hence, these are liquid investments.
Non-resident Indians (NRI’s) cannot invest in these NCD’s.
Crisil have rated these NCDs as AA/Stable and Brickworks rated them as AA+/Stable, which indicate that instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.
Here are the interest rates on the Jan 2019 NCD’s of India Infoline Finance
What is the issue break-up?
Institutional Portion – 20% of the issue
Non Institutional Portion – 20% of the issue
High Net Worth Individuals – 30% of the issue
Retail Investors – 30% of the issue
How is the company doing in terms of Financials?
Here are the financials:
1) Total income from operations was Rs 3,748 Crores for FY18 as compared to Rs 3,090 Crores for FY17.
2) Net Income from Operations increased from Rs 1,301 Crores for FY17 to Rs 1,784 Crores for FY18.
3) Net profit improved from Rs 423 Crores in FY17 to Rs 554 Crores in FY18.
4) Net NPA has increased from 0.58% as of March 31, 2017 to 0.79% as of March 31, 2018.
Why to invest in these NCD?
This is a Leading NBFC company in India.
Attractive interest rates where one can get 10.5% yield.
Good credit rating from Brickworks and Crisil.
Why not to invest in India Infoline Finance Jan 2019 NCD?
1) It issues Unsecured NCD’s. Means something happens to company performance and it gets windup, investors would be given less preference in repayment.
2) Any increase in the levels of non-performing assets (“NPA”) on its loan portfolio, for any reason; whatsoever, would adversely affect its business and results of operations;
3) Any volatility in interest rates, which could cause gross spreads to decline and consequently affect its profitability;
4) Unanticipated turbulence in interest rates or other rates or prices and Performance of the financial and capital markets in India and globally or Changes in the value of Rupee and other currency changes can affect the performance of the company
5) Changes in India and/or foreign laws and regulations, including tax, accounting, banking, securities, insurance and other regulations; changes in competition and the pricing environment in India; and regional or general changes in asset valuations;
6) Its inability to sustain growth or manage it effectively can affect its performance.
7) Its inability to successfully diversify the portfolio can impact its financial performance.
8) Any disruption in its sources of funding could lead to slow growth of the company.
9) Its inability to obtain or maintain statutory or regulatory approvals and licenses for conducting our business can slow its growth.
10) You can refer all risk factors in the Final prospectus of the company.
How to apply India Infoline NCD Issue of 2019?
You can apply these NCDs in demat form only. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. The process of applying NCD would be through ABSA (Your amount would be blocked initially and upon allotment, your amount would be deducted and NCD allotment would be done, else your amount would be unblocked) You can reach out to any of the lead managers websites to know more details on how to apply them.
How India Infoline Finance Jan 2019 NCD are taxed?
Since you need to apply through the demat form only, there would not be any interest on the NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the interest in their income tax returns and pay income tax based on the individual tax bracket.
When this India Infoline Finance NCD of 2019 would get listed on BSE?
These IIF Finance NCDs of January, 2019 would get listed after 6 working days from the date of closure. Means it would get listed approx. on 1st March, 2019 assuming that it would continue till 20th February, 2019 i.e. the last date of subscription. If it is subscribed earlier and subscription closes, it would get listed after 6 days from such closure.
Should you invest in India Infoline Finance NCD of Jan 2019?
Refer my earlier articles about NCD’s and you would get the answer. You should ask these 4 questions before you want to invest in these NCDs.
1) India Infoline Finance offers both secured and unsecured NCDs. Investing in unsecured NCD’s would be high risk as they are not backed up with any assets of the company and in case of windup of the company due to performance issue, investors would get least preference in the repayment of these NCDs. Do you want to invest in such NCD’s then?
2) These NCD’s are for 39 months, 5 years and 10 years. Do you want to park your money in high risk NCD for long term of 5 or 10 years? Parking money in high risk options for longer time is not advisable as no one can predict what happens to companies in the long term. You can look for 39 months secured NCDs as these are for short term and they are secured in nature.
3) India Infoline Finance NCD offers yield upto 10.5% interest per annum. There are several banks which still offer 7% to 8% on their fixed deposits which carry little lower risk compared to NCDs. If you are a high risk taker, investing in the secured NCDs that give over 8% returns may be one of the best investment options.
4) Its NPAs are very high compared to other companies. In future there could be delays in payment of interest if they start writing off money and their profits shrink. Are you okay with this?
Conclusion: India Infoline (IIFL) Finance NCDs offers high interest rates. Secured NCDs are somewhat better compared to unsecured. If you are a high risk taker and willing to invest in such companies even after IL&FS Scam, you can consider investing in Secured NCDs for 39 months. You should stay away from unsecured NCDs or NCDs that are for long term of 5 or 10 years as we do not know how the company would perform in the long run.
Readers, do you feel these NCDs are worth investing?
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India Infoline Finance NCD Jan 2019 Issue Review