9.1% DHFL NCD Issue May 2018 – Tranche I – Should you invest?

DHFL NCD Issue May 2018 - Tranche I - ReviewDHFL NCD Issue May 2018 – Tranche I – Should you invest?

After one and half years, Dewan Housing Finance Corporation Limited (DHFL) is coming with NCDs now. DHFL NCD May 2018 Public Issue would open for subscription on 22nd May, 2018. DHFL NCD offers 9.1% interest rates. These are Secured NCDs. DHFL is offering Floating Link Interest Rates for 3 years NCDs which is unique among NCDs. When interest rates are low, high interest rate NCDs from Dewan Housing Finance Corporation (DHFL) would definitely attract investors who want to invest in short term to medium term. Should you invest in DHFL NCD Issue May 2018? What are the risk factors one should consider before investing in such NCDs?

Also Read: Best Performing Mutual Funds to invest in 2018

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 Issue May 2018 – Tranche I

Issue start date: 22-May-2018

Issue end date: 4-Jun-2018

NCD’s are available in 7 options. It offers NCD for 3 years, 5 years and 7 years tenure.

These are secured NCDs.

Interest payable every year or monthly basis depending on the option chosen by investor.

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.

These NCD’s are rated as CARE AAA by CARE and BWR AAA by BWR indicating stable outlook.

Categories III and IV investors who are senior citizens are eligible for an additional interest rate of 0.10% compared to other investors.

DHFL NCD Prospectus May 2018 can be downloaded this link

Interest rates of DHFL NCD Issue May 2018 – Tranche I

DHFL May 2018 NCD Issue - Interest Rates

What is Floating Interest Rate in this NCD offered for 3 years Tenure?

Company is offering Series VII NCDs which carries floating interest rate based on Overnight MIBOR benchmark rates plus applicable spread to various Categories of Investors. The specified spread shall be 2.16% p.a. for all Category of Investors. While the spread will be fixed throughout the tenor of the Series VII NCDs, since the floating interest rate on such NCDs is total of Reference Overnight MIBOR on an annualized basis plus the fixed spread of 2.16%, floating interest rate will change according to change in Reference Overnight MIBOR.

Let me explain to you in simple formula.

Interest is paid for these NCDs = Benchmark MIBOR + Spread of 2.16%.

The current MIBOR rate is around 6%. Means the interest rate is around 8.16% which would change during the tenure of the NCD.

When DHFL NCD of May 2018 is proposed to be listed on stock exchanges?

The NCDs are proposed to be listed on BSE and NSE. The NCDs shall be listed within 12 Working Days from the date of Tranche 1 Issue Closure.

How is the company doing in terms of profits?

Its profits are as below:

1) Year ended Mar-2016 – Rs 744.15 Crores

2) Year ended Mar-2017 – Rs 2,806.3 Crores (Includes some exceptional items)

3) Year ended Mar-2018 – Rs 1,153.2 Crores

What are the taxation rules for these NCDs?

These NCDs would provide fixed income per month or per annum or on maturity. Since these are issued in demat form, the company would not deduct any income tax on the interest on these NCDs. However, it is the duty of the individual to declare this income and pay income tax as per their income tax slab. E.g. if you are falling under 20% tax bracket and received Rs 20,000 as income, you need to pay Rs 4,000 as income tax in that year.

When these NCDs are proposed to be listed on stock exchanges?

The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 12 Working Days from the date of the Tranche 1 Issue Closure. 

Why to invest?

1) The company is earning consistent and improving margins in the last 3 years. Its EPS was 25.7 for FY2016 and Rs 37.1 for FY2018.

2) These NCDs offer attractive interest rates where you can get yield up to 9.1% per annum.

3) 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 in DHFL NCD Issue May 2018?

1) Its business has been growing consistently in the past. Any inability to maintain its growth may have a material adverse effect on its business, results of operations and financial condition.

2) Its business is particularly vulnerable to volatility in interest rates.

3) 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.

4) Its indebtedness and conditions and restrictions imposed by its financing arrangements could adversely affect its ability to conduct its business and operations

5) They regularly introduce new products for its customers, and there is no assurance that its new products will be profitable in the future.

6) In order to sustain its growth, they will need to maintain a minimum capital adequacy ratio statutory liquidity ratio. There is no assurance that they will be able to access the capital markets when necessary in order to maintain such a ratio

7) As a 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.

8) They are a listed HFC and are 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.

9) 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.

10) They operate in a highly competitive industry in India

11) Any downgrade in its credit ratings may increase interest rates for refinancing its standing debt, which would increase its financing costs, and adversely affect its future issuances of debt and its ability to borrow on a competitive basis

12) They are party to certain legal proceedings and any adverse outcome in these or other proceedings may adversely affect its business.

13) Other Internal and external factors can be read at risk factors of the NCD prospectus.

Also read: Latest Interest Rates in Post Office Small Saving Schemes in 2018

How to apply these DHFL NCD Issue May 2018 – Tranche I?

DHFL NCD Issue of May/June Tranche-I of 2018 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 advise 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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DHFL NCD Issue May 2018 – Tranche I – Should you invest

Suresh KP


  1. Dear Mr Suresh

    Sorry to bother you with further Income Tax querries. Hope you would not mind about that. I request your guidance on the following.

    1. I receive Annuity Pension from the Superannuation fund maintained by LIC the contribution for which was made by employer during my employment. Under what head I should declare this in my income tax return?

    2. I also receive pension paid by Employees Provident Fund organisation under the Employees Pension Scheme `1995. Under what head I should declare this income?

    3. I also receive annuity from LIC in respect of my Jeevan Suraksha policy the premium for which was paid by me and I had claimed exemption under sectio 80cc. Under what head I should declare this income?

    In case all the above treated as Salary/Pension then whose name I should mention against the employer in each of the above receipt?

    Please guide me.

    Thanks once again.


    1. Category-I – Institutional Investors;  Category-II – Non-Institutional Investors;   Category-III – High Net-worth Individual, (“HNIs”), Investors;    Category-IV – Retail Individual Investors;   We fall under retail investors – Category-IV

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