IIFL Home Finance Ltd is set to launch its secured Non-Convertible Debenture (NCD) bonds in December 2024. These NCDs offer an opportunity to earn attractive fixed returns over a specified tenure. Should you consider investing in these NCDs? Let’s analyze the details, features, and associated risks to help you make an informed decision.
About IIFL Home Finance Limited
Incorporated in 2009, IIFL Home Finance Ltd is a subsidiary of IIFL Finance, a leading financial services provider in India. IIFL Home Finance focuses on providing housing finance solutions, catering to retail and corporate clients with products such as home loans, loans against property, secured business loans, and affordable housing project financing.
As of September 30, 2024, the company has served over 427,048 customers through its 387 branches across 18 states and 2 Union Territories. It operates primarily in key regions, including Delhi NCR, Gujarat, Andhra Pradesh, Telangana, and Tamil Nadu. With borrowings of ₹16,867.54 crores and an average borrowing cost of 8.32% as of September 2024, the company is well-positioned in India’s growing housing finance market.
IIFL Home Finance NCD – Dec-2024 Issue Details
- Issuer: IIFL Home Finance Ltd
- Type of Instrument: Secured, redeemable NCDs
- Tenure Options: Multiple options ranging from 24 to 60 months
- Interest Rates: Up to 9.25% per annum
- Yield to Maturity (YTM): Up to 9.27%
- Minimum Investment: ₹10,000 (10 NCDs of ₹1,000 each)
- Mode of Investment: Demat only
- Credit Ratings:
- CRISIL AA/Stable (indicates high safety and low credit risk)
- IND AA/Stable by India Ratings and Research
- Issue Size: Refer to the prospectus for detailed size and allocation.
Interest Rates
| Options | I | II | III | IV | V | VI | VII | VIII | IX |
|---|---|---|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Annual | NA | Monthly | Annual | NA | Monthly | Annual | NA | Annual |
| Tenure (Months) | 24 | 24 | 36 | 36 | 36 | 60 | 60 | 60 | 84 |
| Coupon (% per Annum) | 8.85% | NA | 8.65% | 9.00% | NA | 8.90% | 9.25% | NA | 9.25% |
| Effective Yield (% per Annum) | 8.85% | 8.85% | 9.00% | 9.00% | 9.00% | 9.27% | 9.25% | 9.25% | 9.25% |
| Amount on Maturity (In Rs.) | 1,000.00 | 1,184.85 | 1,000.00 | 1,000.00 | 1,295.20 | 1,000.00 | 1,000.00 | 1,557.00 | 1,000.00 |
Why Invest in IIFL Home Finance NCDs?
- Attractive Interest Rates: These NCDs offer up to 9.25% annual interest, providing higher returns compared to many fixed deposit options.
- Secured NCDs: The bonds are backed by the company’s assets, offering greater security compared to unsecured NCDs. In case of financial distress, secured bondholders are given priority in repayments.
- Good Credit Rating: A high credit rating (CRISIL AA/Stable) suggests a strong capacity for timely repayment and low credit risk.
- Consistent Performance: IIFL Home Finance has a track record of consistent financial performance and stable profit margins, making it a reliable investment option.
Risks to Consider Before Investing
- High Customer Default Risks: As an NBFC, the company is exposed to non-performing assets (NPAs), which can impact profitability in adverse market conditions.
- Industry Risks: The NBFC sector has witnessed defaults and delays in repayment by some companies in the past. While IIFL Home Finance has a stable record, macroeconomic factors could influence its performance.
- No Deposit Insurance: Unlike fixed deposits in banks insured up to ₹5 lakhs under DICGC, NCD investments do not offer any such insurance, increasing the risk for investors.
Comparison with Alternatives
While these NCDs offer up to 9.27% yield, some small finance banks provide fixed deposits with rates up to 9%, which are insured up to ₹5 lakhs under DICGC. Investors seeking lower risk with marginally lower returns might prefer insured fixed deposits.
How to Invest in IIFL Home Finance NCDs?
The NCDs are available in dematerialized form. Investors can apply through broker platforms like Zerodha, ICICI Direct, or any platform where they hold a Demat account. Application forms can also be accessed through lead managers’ websites mentioned in the prospectus.
Should You Invest in IIFL Home Finance NCDs?
These NCDs provide an excellent opportunity for investors seeking higher fixed-income returns and are comfortable with moderate risk. The secured nature of the bonds and strong credit ratings attract such investments.
However, conservative investors might prefer safer alternatives like small finance bank fixed deposits, which offer similar returns with deposit insurance. Evaluate your risk tolerance and financial goals before deciding.
For detailed terms and risks, please refer to the IIFL Home Finance NCD Dec-2024 Prospectus.
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I feel IIFL Fin share price is attractive and should be added on dips with 1 year view for 30% returns. What do you think?
Also suresh brother pls review Inventurus IPO and post soon. Awaiting it