DHFL NCD Aug / Sep 2016 – Tranche II – Should you invest?
During 1st week of this month, Deewan Housing Finance Limited (DHFL) has come up with Secured Redeemable Non Convertible debentures (NCD) offering 9.3% annualised yield which got subscribed in single day. With such a positive note, now Tranche-II of DHFL NCD Aug/Sep-2016 would open for subscription next week on 29th August, 2016. While I covered about DHFL NCD 2016 issue in my last article, we would cover the details of features and interest of DHFL NCD issue of Aug/Sep-2016 in this post. What are the positive features of DHFL NCD Tranche-II Issue of Aug/Sep 2016? What are the risk factors to be considered if you want to invest in DHFL Secured NCD’s?
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About Deewan Housing Finance Limited (DHFL)
DHFL is a deposit-taking housing finance company focused on providing financing assistance in India primarily in Tier II and Tier III cities and towns. The company has been providing services in the housing finance sector in India since 1984. Company provides secured finance to individuals, partnership firms and companies towards the purchase, construction, improvement and extension of home, new and resalable flats, commercial properties and land. It also provides non-housing loans which includes loans for commercial properties, medical equipments and for plant & machinery.
Features of DHFL NCD Aug / Sep 2016 – Tranche II
- Issue start date: 29-Aug-2016
- Issue end date: 12-Sep-2016
- NCD’s are available in 3 options. 3 years, 5 years and 7 years tenure NCD’s are available.
- Interest payable every year.
- The face value of the NCD bond is ₹ 1000.
- Minimum investment is for the 10 bonds. Means, you need to invest for a minimum of ₹ 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.
- These NCD’s are rated as CARE AAA by CARE and BWR AAA by BWR indicating stable outlook.
- Draft Prospectus can be downloaded this link
Interest rates of DHFL NCD Aug / Sep 2016 – Tranche II
What is the issue breakup?
- Retail Portion – 30%
- QIB Portion – 30%
- Corporate Portion – 10%
- HNI Portion – 30%
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How is the company doing in terms of profits?
Its profits are as below:
- Year ended Mar-2015 – ₹ 323.72 Crores (9.5%)
- Year ended Mar-2016 – ₹ 749.3 Crores (10%)
Why to invest?
- The company is earning consistent profits of over 9.5% in the last couple of years. This indicates strong repayment capacity of interest from its profits.
- Attractive interest rates up to 9.25% per annum.
- This is secured NCD issue. 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?
- Business is particularly vulnerable to volatility in interest rates.
- Any increase in the levels of non-performing assets in its loan portfolio, for any reason whatsoever, would adversely affect its business, results of operations and financial condition.
- Company indebtedness and conditions and restrictions imposed by its financing arrangements could adversely affect its ability to conduct its business and operations
- 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 access the capital markets when necessary in order to maintain such a ratio.
- As an HFC, they face the risk of default and non-payment by borrowers. 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.
- Other Internal and external factors can be read at risk factors of the NCD prospectus.
Also Read: Top Stock Brokers offering lowest demat charges in India
How to apply these Deewan Housing Finance (DHFL) NCD Aug / Sep 2016 – Tranche II?
DHFL NCD Issue of Aug/Sep Tranche-II of 2016 is available in physical form as well as demat form. You can apply online on any of the broker website where you are maintaining a demat account. For more information on this you can refer 1st page of the prospectus.
Conclusion: These DHFL Limited NCD’s are secured in nature. Though it carries some element of risk, they are secured. Several times, I advised investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. Considering high interest rates and secured NCD’s in nature, one can consider investing in these NCD’s after assessing risk factors indicated above.
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Suresh
DHFL NCD Aug / Sep 2016 – Tranche II
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Has anyone applied for the ncd, I am unable to find the link where we can apply for the bond.
Is there any chances for listing gain
These are bonds and not IPO. However, yes, these can list at higher price once listed on stock exchange as they are on high demand.
Can one apply Tomorrow also as it is already oversubscribed
Ranjan, once it is subscribed fully, others may not apply.
please suggest some good insurance plan for my son who is now twenty years old.
Hi Ravi, You can consider taking term insurance plan for him which comes with low premium and high risk coverage
Dear sir i want to know that at the time of maturity of NCD the total amount will received is as per listed price of NCD or invetment amount.
On maturity, it would be maturity amount and not on listed price
Hello Suresh
Is it a good option to suscribe in these NCDs if we fall in the 30 % tax bracket ?
Please explain the Tax on these NCDs .
Hi Roopa, It is still a good option for 30% tax bracket. Instead of investing in bank FD you can invest in these NCD’s.
How these bonds are assigned? Is it based on first come first serve or like ipo where it's on your luck?. Kindly, clarify.
Thanks
First come first serve basis
Dear Sir, When we see the issue during listing time we see option like 3, 5 or 7 years. But when we try to buy in open market, I don't see any option. How can i know about the redumption date? (I have not bought till date this is the first one i will invest)
These are not available in open market. These are issued first time. Login to your demat account as on the date of opening this issue and select series I to III i.e 3 5 and 7 years option and subscribe
Nice article
Hi Suresh,
Which one will be better – these Secured listed NCD’s giving 9-10% returns or debt funds giving 8-13% returns?
Liquidity, rate of interest & Tax to be deciding factors…
debt funds are better tax efficient and liquidity, however does not guarantee any returns. NCD’s offer fixed interest rates, can be sold on stock exchanges, but are taxed based on Income tax slab. Both have pros and cons and one can select based on what they prefer
Hello Suresh
Thank you very much for timely sharing your analysis. Can you give some more clearity on scheme 1,2&3 mentioned in the details.
Thank you.
It is only 3, 5 and 7 years tenure and interest rates applicable to these options