8.75% IIFL Finance NCD – Sep-2021 issue – Should you subscribe?

IIFL Finance NCD - Sep-2021 Issue - Features, Interest Rates and ReviewIIFL Finance NCD offer 8.75% interest rates in Sep-2021 issue – Should you subscribe?

IIFL Finance has come up with secured NCD issue (Tranche-II) that would open for subscription on 27th September 2021. IIFL Finance Limited (formerly IIFL Holdings Limited) is systemically important non deposit taking NBFC company in India. IIFL Finance offers interest rates are up to 8.75%. These bonds are issued in 7 different series and for a tenure of 24 to 60 months. Should you invest in IIFL Finance NCD of September, 2021? What are the risk factors one should consider before investing in such high risk NCDs?

Also Read: JM Financial NCD offers up to 8.3% Yield

About IIFL Finance Limited

IIFL Finance is a systemically important non deposit taking NBFC registered with RBI. It offers home loans, gold loans and business loans including loans against property and medium and small-scale enterprise financing, micro finance etc., to both retail and corporate customers.

IIFL Finance Limited has two subsidiaries – IIFL Home Finance Limited (100%) and IIFL Samasta Finance Limited (74.34%).

Company is backed up by Fairfax and CDC to the tune of 45% of the total shareholding.

Features of IIFL Finance NCD September 2021 – Tranche II

IIFL Finance NCD opens for subscription on 27th September 2021 and closes on 18th October 2021. These are issued on first come first serve basis, hence the subscription can be closed before the planned closure date.

NCD’s are available in the 7 different series.  Interest on these NCDs is paid either monthly, yearly or on maturity depending on the series chosen by the NCD investor.

It offers NCD for 24 months, 36 months and 60 months tenure.

Coupon interest rates are between 8.25% to 8.75%. The yield is up to 8.75%.

These are secured NCDs. Means if company gets into financial crisis or shuts down for some reason, NCD investors would preference in the repayment of principal amount along with capital.

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 NSE/BSE. Hence, these are liquid investments.

NRI’s cannot apply to this NCD subscription.

The base issue size for Tranche-II issue is Rs 100 Crores with an option to retain over subscription up to Rs 900 Crores totaling to Rs 1,000 Crores.

Edelweiss Financial Services, IIFL Securities and Equirus Capital are the lead managers for the issue.

IIFL Finance NCD Sep-2021 Prospectus SEBI link

What are the IIFL Finance NCD interest rates?

IIFL Finance NCD Interest Rates - Sep-Oct-2021 issue

What are the IIFL Finance NCD credit ratings?

These NCDs have been rated as CRISIL AA/Stable by CRISIL Ratings and BWR AA+/Negative by Brickworks Ratings. It indicates that instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.

How is the NCD issue break-up?

IIFL Finance NCD Sep-2021 - Issue break-up

When IIFL Finance NCD’s would be listed on stock exchanges?

The NCDs are proposed to be listed on BSE/NSE. The NCDs shall be listed within 6 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-2019 – Rs 794.7 Crores

Year ended Mar-2020 – Rs 503.4 Crores

Year ended Mar-2021 – 760 Crores

Why to invest in IIFL Finance NCD issue?

1) These NCDs offer attractive interest rates up to 8.75% and yield up to 8.75% per annum. Currently banks or financial institutions are offering low interest rates on FDs, hence these are attractive investment options.

2) Good revenue and margin growth in the last 3 years (while FY20 there is dip). Investors should always invest in NCDs of consistent growing companies, as there are lesser chances that such companies would delay payment of interest or repayment of capital.

3) These NCDs are offered in 7 different series. Investors have a choice to invest in a series that are best suitable to them.

Why not to invest in these bonds?

Here are the risk factors of investing in these bonds.

1) Company’s inability to recover the amounts due from customers to whom they have provided secured or unsecured loans in timely manner can affect company business.

2) Company is subject to supervision and regulation by the RBI as a systemically important NBFC, changes in RBI regulations governing can affect its business.

3) There are outstanding legal proceedings against the group companies. If determined, could have a material adverse impact on its business.

4) Company can have high levels of customer defaults and resultant non-performing assets can adversely affect company business.

5) Company financial performance is particularly vulnerable to interest rate risk and volatility in interest rates can affect its business.

6) Refer NCD prospectus for complete risk factors.

How to buy IIFL Finance NCD?

These are issued only in demat form. You can login to your demat and trading account and check NCD’s link and select the IIFL Finance NCD issue and enter the investment amount and submit.

You may like: Indel Money NCDs offer up to 12% interest rates

Should you invest in IIFL Finance NCD issue of Sep-2021(Tranche-II)?

IIFL Finance NCD offers high interest rates up to 8.75%. Currently banks or financial institutions are offering low interest rates in FDs. These are secured NCDs. Means if company gets into financial crisis or shut down for some reason, investors will get preference in payment of interest and repayment of capital. These NCDs are rated as AA by CRISIL and Brickworks Ratings which are considered as good rating.

On the other hand, one should not forget about NBFC companies delaying payment of interest and repayment of capital. There are few cases of defaults too. Investors should consider these risk pointers before investing in such NCDs.

Moderate to high-risk investors can invest in such NCDs. Low risk investors should stay away from such NCDs.

If you enjoyed this article, share this with your friends and colleagues through Facebook and Twitter.

18 comments

  • D. Chaudhuri

    Very clearly explained the risk-reward possibility.

  • Venugopal

    On the topic of the safety of NCDs.

    According to comments posted and Mr Suresh’s views also, we reach the verdict that even high rated (AA) NCDs are inherently unsafe. And Corporate FDs being unsecured are even more unsafe. And the ultra safe National banks like SBI offer comically low interest rates. So what are the options left for retired senior citizens who don’t want to lose their nest egg?

  • Amitava Roy

    Which of the NBFCs are comparatively safe to invest as per your analysis?

  • Sujata Nair

    Suresh Sir,
    From your NCD reviews, I have come to the conclusion that NCDs in general are not for low risk investors. I have been reading your NCD reviews and I do not think you have ever recommended any NCD with enthusiastic approval – Like go invest and make hay while sun shines :-). Please correct me if my assessment is wrong.

    • Low risk investors – Means they expect returns + safety of money.

      Post DHFL crisis, we could see several companies delaying interest payments and repayment of capital. Obviously this would not fall in low risk investors bucket. Hence we have been classifying them as moderate to high risk investors only.

      In your opinion these risk (indicated above) can be taken by low risk investors ?

      • Francis

        Dear Suresh,

        I think Sujatha has made a very important Synthesis.

        IN TODAY’S ENVIRONMENT, NCDS ARE NOT FOR LOW RISK INVESTORS.

        Not only is your website tops, but even the comments are highly informative.

        Cheers .

      • Vishnu

        Dear Suresh,

        Other than DHFL, which companies have defaulted on interest payments ? With your years of experience watching the business scenario, could mention any other company or companies who have defaulted. Otherwise we could optimistically conclude that the DHFL situation was a one off and we do not have to be spooked from investing in AA rated secured NCDs. Kindly answer my query.

        • To name a few
          1) DHFL (defaulted, I hope you don’t need proofs)
          2) Reliance ADAG group NCDs from all its subsidiaries (defaulted) (Source link)
          3) IL&FS NCD payments default (Source link)
          3) SREI NCDs (has been delaying payments, check many investors did not get payment even till Aug-21),
          4) GMR Warora NCDs defaulted in 2020 (Source link)
          5) Sical Logistics NCDs – Delay in interest pymt (Source link)

          I hope you don’t need any more proofs

          Enjoy your day

        • Munir Iqbal

          That was an excellent question Vishnu! It provoked a very informative reply from Suresh. I myself did not know defaulting is the default behaviour of NCDs. Ofcourse I had heard of DHFL, but I didn’t know of the other companies mentioned by Suresh.

          Dear Suresh, I have more question which I hope you will answer.

          Are NCDs generally utilised by investors have their basic security safely tucked away and have surplus cash to invest and who would not affected by default of interest payments or even loss of principal amount?

          Munir

          • Thanks Munir. What I generally observed is these NCDs are still over subscribed within closure dates

            1) High risk investors still want to take risk and invest as bank FDs are providing 5% to 5.5% interest rates (large banks) and investors feel unsecure to invest in smaller bank FDs
            2) Investors are investing in such schemes without understanding the risks involved. Either they are not aware or risks, or agents are trapping them for commissions. I have plenty of emails coming to me now and then saying they were not aware of these risks and there is delay in interest payment. I really feel bad about some horrible stories like someone says they are not getting responses from company for repayment of their capital invested in NCDs and they are either nearing to retirement / daughter marriage is getting delayed.

  • S.V. Subrahmanyam

    Article is good. However, why IIFL is called systematically important NBFC. It should be systemically important. Such kind mistakes should be avoided.

Leave a Reply

Your email address will not be published.