Dhani Loans and Services Limited have come up with Secured NCD Bonds, which would open for subscription on 19th April, 2022. Dhani Loans and Services (formerly known as Indiabulls Consumer Finance Limited) is NBFC registered with RBI. It is the subsidiary of Dhani Services Limited, formerly Indiabulls Ventures Limited. It offers high interest rates up to 11%. Should you invest in Dhani Loans and Services NCD issue? What are the risk factors in such NCDs?
About Dhani Loans and Services Limited
Dhani Loans and Services Limited is a non-deposit taking systemically important NBFC registered with the RBI. It is fully owned / subsidiary of Dhani Services Limited (erstwhile Indiabulls Ventures Limited) which is a listed company in India.
Dhani Loans provide transaction finance to its customers through various product offerings on the Dhani App and also provide personal loans, secured and unsecured business loans to individual and corporates.
It is part of the Dhani group. Its Promoter, Dhani Services Limited (formerly Indiabulls Ventures Limited) is a consumer business that provides digital healthcare and digital transactional finance to its customers.
Dhani Loans and Services NCD issue details
It offers secure NCD Bonds as part of this issue.
The issue opens on Tuesday 19th April, 2022 and closes on Tuesday 10th May, 2022.
These NCD bonds are available on first come first serve basis. Means if it is oversubscribed, it would get closed before the NCD closure date.
Interest rate are ranging between 10.03% to 11% per annum depending on the series chosen by the investor.
Interest is paid monthly, yearly or on maturity depending on the option chosen by the investor.
These NCD are issued for 370 days, 24 months and 36 months tenure.
The face value of the NCD is Rs 1,000 per bond. One needs to subscribe to 10 NCDs i.e. Rs 10,000 minimum and in multiples of 1 bond each.
These bonds would be listed on NSE/BSE. If investors need money, they can sell them on stock exchanges. However, the trading price would depend based on the demand on that day.
Dhani Loans and Services NCD issue size is for Rs 100 Crores with an option to retain oversubscription for another Rs 100 Crores totalling to Rs 200 Crores.
These NCDs are issued in demat form only.
Edelweiss Financial Services Limited and Trust Investment Advisors Private Limited are the lead managers for this NCD issue.
Kfintech Technologies Limited is the registrar of the NCD issue.
Dhani Loans and Services NCD Interest Rates
How these NCDs are secured?
The secured NCDs proposed to be issued will be secured by a first ranking pari passu charge on present and future receivables and current assets of the Issuer for the principal amount and accrued interest thereon as specifically set out in and fully described in the Debenture Trust Deed. The NCDs will have a minimum asset cover of 1.25 times on the principal amount and interest thereon at all times during the tenor of the NCDs.
Dhani Loans and Service NCDs are secured in nature. Means if something happens to the company and it gets shut down / wind-up, NCD investors would be given preference in the repayment of capital as well as the interest.
What is Dhani Loans and Services Limited NCD credit rating?
Dhani Loans NCD credit rating as per NCD prospectus filed with SEBI is IVR AA/Stable Outlook by Infomerics Valuations and Rating.
Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
Why to invest in Dhani Loans and Service NCD?
Here are a few positive points in these NCDs
1) These NCDs offer high interest rate between 10.03% to 11%. Currently A rated bonds are offering interest rates between 9% to 10%, hence such high rated bonds would definitely attract investors.
2) Company has good credit rating of IVR AA from Infomerics Valuations. Such credit rating indicates these instruments as low risk.
Why not to invest in these NCD?
Here are some of the risk factors in this NCD issue.
1) The company has incurred losses in the recent past. It incurred a Rs 115.82 Crore loss in FY21, 247.95 Crores loss for Qtr ending Jun-21, Rs 74.6 Crores loss for Qtr ending Sep-21, however generated a profit of Rs 75 Crores for Qtr ending Dec-2021 (Source: Company website). In future, the company might face difficulty in payment of interest to NCD interest holders.
2) Covid pandemic has an impact on company business. Such pandemics are uncertain and cannot be predicted for the future.
3) High levels of customer defaults can result in increase NPAs and can affect business.
4) Investing in NBFC companies NCD are high risk. As an example, DHFL defaulted NCD investors payments, SREI delayed the payment of capital and interest etc.,
5) Investors should read the NCD prospectus and understand the risk factors before investing in these bonds.
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Should you invest in Dhani Loans and Services NCD?
Company NCD’s offer high interest rates up to 11%. It has a good credit rating of AA from Infomerics Valuations and Ratings.
Like I indicated earlier, I do not understand the math behind having such a good credit rating for a loss making company. Company is incurring losses and hence interest payments might get delayed in future.
High risk investors who understand all these risks can invest in these NCD Bonds.
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