10.4% Indiabulls Consumer Finance NCD May 2019 – Should you Avoid?
Indiabulls Consumer Finance NCD May 2019 Review
Indiabulls Consumer Finance NCD for May 2019, Tranche-II would open for subscription on 30th May, 2019. Indiabulls Consumer Finance is a leading Non deposit taking NBFC company in India. It is issuing secured NCD’s now. While banks are offering interest rates of 5.5% to 8%, high yield of these NCDs to 10.4% per annum would definitely attract investors. It is offering NCDs of 400 days, 24 months, 36 months, 60 months. Should you invest in Indiabulls Consumer Finance NCD of May/June 2019? What are the hidden factors an investor should consider before investing Indiabulls Consumer Finance NCD of 2019? How does Indiabulls Consumer Finance NCD compare with Muthoot Finance NCD, which is open now for subscription.
What are Non Convertible?
If you would like to know more about Non Convertible Debentures (NCDs), you can check this video.
About Indiabulls Consumer Finance Limited
Company is a non-deposit taking systemically important NBFC registered with the RBI and a 100% subsidiary of Indiabulls Ventures Limited, a listed Indian company. They focus primarily on providing personal loans, business loans (unsecured SME loans and secured SME loans) and other loans. We are part of the Indiabulls Ventures group, which is a prominent financial services company providing brokering, lending and wealth management businesses, amongst other businesses.
Indiabulls Consumer Finance NCD May/June 2019 – Tranche-II Issue details
Indiabulls Consumer Finance Limited is issuing secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 100 Crores with an option to retain another Rs 900 Crores over subscription totaling to Rs 1,000 Crores. It comes with 9 different options, which contains 400 days, 24 months, 36 months and 60 months tenure NCDs.
What does Secured NCDs mean?
They are offering secured NCD’s now in May/June 2019. The principal amount of the NCDs to be issued in terms of the Draft Shelf Prospectus, this Shelf Prospectus and respective Tranche Prospectus together with all interest due on the NCDs in respect thereof shall be secured by way of an exclusive charge on identified receivables of Company and a pari passu charge in favour of the Debenture Trustee on an identified immovable property of Company, as may be decided mutually by Company and/or the Debenture Trustee at the time of filing of relevant Tranche Prospectus. The company will create appropriate security in favor of the Debenture Trustee for the NCD Holders on the assets adequately to ensure 100% asset cover for the NCDs.
Features of Indiabulls Consumer Finance NCD of May 2019 – Tranche-II
Issue start date: 30-May-2019
Issue end date: 21-Jun-2019
NCD’s are available in 9 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/NSE. Hence, these are liquid investments.
Non-resident Indians (NRI’s) cannot invest in these NCD’s.
CARE rated these NCDs as CARE AA: Stable (Outlook Stable) and BWR Ratings has rated them as BWR AA+ (Outlook Stable). The rating of the NCDs indicates that Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.
Edelweiss Financial Services, Axis Bank, AK Capital Services and Trust Investment Advisors are the lead managers for this issue.
Here are the interest rates on the May/June 2019 NCD’s of Indiabulls Consumer Finance.
What is the issue break-up?
Here is the issue break-up.
1) Qualified Institutional Buyers QIB Investors – 20%
2) Corporate Investors – 20%
3) High Net Worth Individuals – 30%
4) Retail Investors – 30%
How is the company doing in terms of Financials?
Here are the financials:
1) Its consolidated revenues for the year ended Mar-18 was at Rs 654 Crores Vs year ended Mar-19 of Rs 1,650 Crores.
2) Its consolidated profits for the year ended Mar-18 was at Rs 170 Crores Vs year ended Mar-19 of Rs 400 Crores.
Why to invest in Indiabulls Consumer Finance Ltd NCD?
1) Attractive interest rates where one can get up to 10.4% yield.
2) It is issuing secured NCDs which are safe to invest compared to other unsecured NCDs.
3) Good credit rating from CARE and BWR Ratings Ratings as AA: Stable and AA+ (Outlook Stable) respectively.
4) Company revenues and profits are growing, hence less risk of delay in payment of interest and repayment of capital.
Why not to invest in Indiabulls Consumer Finance May 2019 NCD?
1) Majority of NBFC companies are facing liquidity crunch now in 2019. Investing at this point could be high risk.
2) High levels of customer defaults and the resultant non-performing assets could adversely affect its Company’s business, financial condition, results of operations and future financial performance.
3) Its business has been growing consistently in the past. Any inability to manage and maintain its growth effectively may have a material adverse effect on its business, results of operations, financial condition and cash flows.
4) Company Promoter and certain of Directors are party to certain legal proceedings and any adverse outcome in these or other proceedings may adversely affect its business.
5) Its inability to maintain relationship with the top 20 customers or any default and non-payment in future or credit losses of its single borrower or group exposure where we have a substantial exposure could materially and adversely affect its business, future financial performance and results of operations.
6) They are vulnerable to the volatility in interest rates and may face interest rate and maturity mismatches between its assets and liabilities in the future which may cause liquidity issues.
7) Company 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 Company or the industry in which Company operates could adversely affect its business.
8) Company’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.
9) Company’s inability to obtain, renew or maintain the statutory and regulatory permits and approvals which are required to operate its existing or future businesses may have a material adverse effect on its business, financial condition and results of operations.
10) Company may not be able to recover the full value of collateral or amounts which are sufficient to cover the outstanding amounts due under defaulted loans on a timely basis or at all and as a result, which could adversely affect its financial condition and results of operations.
11) Company’s business requires substantial capital and any disruption in the sources of its funding or an increase in its average cost of borrowings could have a material adverse effect on its liquidity and financial condition.
12) Instability of global and Indian economies and banking sectors could affect the liquidity of the Company, which could have a material adverse effect on its Company’s financial condition.
13) You can refer all risk factors in the Final prospectus of the company.
How to apply Indiabulls Consumer Finance 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 unit 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 Indiabulls Consumer Finance May 2019 NCD interest is taxed?
Since you need to apply through the demat form only, the company would not deduct any TDS on the interest paid on these NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the NCD interest as income in their income tax returns (ITR) and pay income tax based on the individual tax bracket.
When this Indiabulls Consumer Finance NCD’s of 2019 would get listed on BSE?
These Indiabulls Consumer Finance Limited NCDs of May, 2019 would get closed on 21st June, 2019. They would get listed after 6 working days from the date of closure. However, if the NCD issue is closed before due date on a first come, first serve basis, these would be listed as soon as the issue is closed.
Muthoot Finance NCDs Vs Indiabulls Consumer Finance NCDs – Which are best NCDs?
Let us review these 2 NCDs as these have come at the same time.
1) Rate of Interest: Muthoot Finance NCD offers 10% yield for 5 years tenure. In case of Indiabulls Consumer Finance NCD it offers 10.4%. Hence Indiabulls NCDs score high here.
2) Credit Rating: Both credit ratings are AA/Stable and AA Positive.
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Should you invest in Indiabulls Consumer Finance NCD of May 2019?
These NCDs are secured in nature and offer high interest rates. However, investing in NCDs of NBFC companies are high risk now. Investing in NCD’s for long term of 5-10 years would be even more risk. Since Indiabulls Consumer Finance offer NCDs for 400 days, 24 months, 36 months tenure also, high risk investors can invest in these NCDs considering the risks and negative factors indicated here. One can ignore 5 years NCDs as we do not know how the company would perform in the long run.
Alternatively, you can invest in some of the best large cap mutual funds that can provide high returns with similar risk though not guaranteed.
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Indiabulls Consumer Finance NCD May 2019 Review