Tata Capital Housing Finance NCD Jan 2020 – Should you Invest?
Tata Capital Housing Finance NCD Jan 2020 review
Tata Capital Housing Finance NCD Issue would open for subscription on 7th January, 2020. Tata Capital Housing Finance offers interest rates on its NCDs upto 8.7%. They are offering both secured and unsecured NCD. Tata Capital is trusted brand, hence higher interest rates from such companies would attract investors. Should you invest in Tata Capital Housing Finance NCD issue in Jan 2020? What are the risk factors one should consider before investing in such high risk NCDs?
About Tata Capital Housing Finance Limited
They are one of India’s leading non-deposit taking housing finance companies registered with the NHB. They were incorporated in 2008 as a wholly-owned subsidiary of TCL and accordingly are part of the Tata Capital Group which is part of the larger Tata group. Its promoter, TCL is majority-owned by Tata Sons Private Limited, the holding company of the Tata group. The company focuses primarily on providing affordable home loans, home equity and construction finance. For Fiscal 2019, they made total loan disbursements of ₹ 11,10,111 lakh. As of September 30, 2019, its gross Non Performing Assets in terms of value and as a percentage of its outstanding loans were ₹ 40,059 lakh or 1.45 %, respectively, and its net NPAs in terms of value and as a percentage of its net outstanding loans were ₹ 14,506 lakh or 0.53 %, respectively.
Tata Capital Housing Finance NCD Jan 2020 Issue details
Issue start date: 7-Jan-2020
Issue end date: 17-Jan-2020
NCD’s are available in 6 options. It offers NCD for 3 years, 5 years, 8 years and 10 year tenure.
Coupon interest rates are between 8.01% to 8.7%.
Series 1 to 5 are secured NCD and Series 6 is unsecured NCDs.
Interest payable monthly or yearly depending on the NCD chosen.
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 500 Crores with an option to retain over-subscription up to Rs 1,500 Crores totaling to Rs 2,000 Crores.
Edelweiss Financial Services and A.K. Capital Services are Lead managers to the issue.
Tata Capital Housing Finance NCD Prospectus can be downloaded here.
Tata Capital Housing Finance NCD – Jan 2020 – Interest Rates
Here are the interest rates.
|Option||Tenure in Years||Interest payment||Coupon Rate (Interest) Individuals||Effective Yield||Maturity Value|
What is the allocation ratio of these NCDs?
1) Retail Portion – 40% of the issue
2) HNI – 40% of the issue
3) Qualified Institutional Portion – 10% of the issue
4) NII – 10% of the issue
What are the credit ratings for these NCDs?
The NCDs have been rated by Crisil as CRISIL AAA/Stable.
The NCDs have been rated by ICRA as ICRA AAA/Stable.
The rating of the NCDs by them indicates the highest degree of safety regarding timely servicing of financial obligations
When these NCDs are proposed to be listed on stock exchanges?
The NCDs are proposed to be listed on BSE and NSE. The NCDs shall be listed within 6 working days from the date of the closure.
How is the company doing in terms of profits?
Its consolidated profits are as below:
Year ended Mar-2018 – Rs 678 Crores
Year ended Mar-2019 – Rs 1,029 Crores
How the returns received from these NCDs are 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?
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.
These NCDs offer attractive interest rates where you can get yield up to 8.7% per annum.
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 Tata Capital Housing Finance NCD Jan 2020?
1) As an HFC, they face the risk of default and non-payment by borrowers and other counter parties. 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.
2) Its business is particularly vulnerable to volatility in interest rates, market risks and asset liability management risks which may have great impact on its financial performance.
3) Any increase in the levels of NPAs in its loan portfolio, for any reason whatsoever, would adversely affect its business, results of operations and financial condition
4) In order to sustain its growth, they will need to maintain a minimum capital adequacy ratio. There is no assurance that they will be able to raise capital when necessary in order to maintain such a ratio.
5) They are an HFC and subject to various regulatory and legal requirements. Also, future regulatory changes may have a material adverse effect on its business, results of operations and financial condition.
6) 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.
7) As an HFC, they have significant exposure to the real estate sector and any negative events affecting this sector could adversely affect its business and result of operations.
8) Other risk factors can be read from NCD prospectus.
How to apply these Tata Capital Housing Finance NCD Issue of Jan 2020?
These NCDs are 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 invest in Tata Capital Housing Finance NCDs in January, 2020?
Tata Capital Housing Finance Limited NCD’s of 2020 offers both secured and unsecured in nature. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. Banks are offering low interest rates now. Considering high interest rates and secured NCD’s in nature, one can consider investing in the secured NCD’s after assessing risk factors indicated above. However, one should invest only for short to medium term. Don’t go for long term NCDs or unsecured as we do not know how the company would perform in the long run.
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Tata Capital Housing Finance NCD Jan 2020 Review