These AA rated IIFL Home Finance NCDs of July 2021 issue offer 10% interest rate
IIFL Home Finance NCDs of July 2021 – Review
IIFL Home Finance has come up with Tranche I of unsecured NCD bonds Issue that would open for subscription on July 6, 2021. IIFL Home Finance Limited is the leading NBFC company in India. IIFL Home Finance NCDs offer interest rates are up to 10% and yield works up to 10.03%. These bonds are issued in 3 series and for a tenure of 87 months. Should you invest in IIFL Home Finance NCDs of July 2021 – Tranche-I? What are the risk factors one should consider before investing in such high risk NCDs?
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About IIFL Home Finance Limited
IIFL Home Finance is retail focused housing finance company with focus on providing loans to first time home buyers in the EWS and LIG segment in the suburbs of Tier 1 cities, Tier 2 cities and Tier 3 cities in India where the collateral is a proposed self-occupied residential property. They serve salaried and self-employed customers who account for 44.37% and 55.63% of AUM as of March 31, 2021, respectively. They have served over 141,000 customers as of March 31, 2021.
It offer customers a range of mortgage-related loan products, including (i) housing loans, for purchase of ready built residential units, under construction property by approved builders, self-construction, home improvement on pre-owned property and purchase of land for construction of residential property; (ii) secured business loans, for primarily meeting working capital requirement, business use and purchase of commercial property; and (iii) affordable housing project loans, to meet construction expenses of affordable housing projects of reputed developers. Housing loans secured business loans and affordable housing project loans contribute 69.78%, 26.00% and 4.22% of our AUM, as of March 31, 2021, respectively.
Features of IIFL Home Finance NCD July 2021 – Tranche I
IIFL Home Finance NCDs would open for subscription on 6th July 2021 and closes on 28th July 2021. These are allotted on first come first serve basis.
NCD’s are available in the 3 series. Series-I would provide interest every year, Series-II would provide monthly and Series-II would provide interest only on maturity.
It offers NCD bonds for 87 months tenure (7 years 3 months).
Coupon interest rates are between 9.6% to 10%. The yield is up to 10.03%.
These are unsecured NCDs.
Interest payable monthly, yearly and on maturity depending on the option chosen by the NCD 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. Hence, these are liquid investments.
NRI’s cannot apply to this NCD subscription.
The base issue size is Rs 100 Crores with an option to retain over subscription up to Rs 900 Crores totaling to Rs 1,000 Crores.
Edelweiss Financials, IIFL Securities, ICICI Securities, Trust Investment Advisors and Equirus are the lead managers for the issue.
Prospectus of IIFL Home Finance NCD July-2021 Tranche I
IIFL Home Finance Interest Rates of this issue
IIFL Home Finance NCD Credit Ratings in 2021
CRISIL rated these NCDs as AA/Stable and BWR ratings rated them as BWR AA+/Negative (Assigned).
This indicates that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.
When these NCD bonds would be listed on stock exchanges?
The NCDs are proposed to be listed on BSE. 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 restated profits are as below:
Year ended March-2020 – Rs 244.9 Crores
Year ended March-2021 – 401 Crores
Why to invest in these NCDs of IIFL Home Finance?
1) These NCDs offer attractive interest rates where investors can get interest up to 10% and yield up to 10.03% per annum.
2) IIFL Home Finance is a leading NBFC company in India.
Why not to invest in these NCDs?
Here are the risk factors of investing in these bonds.
1) It issues unsecured NCDs. If in future, company gets closed due to non-performance for various reasons, investors of unsecured NCDs would get normal preference in the payment of interest and repayment of capital. Investment in unsecured NCDs is high risk in such case.
2) The Spread of COVID-19 pandemic and the consequent nationwide lockdown has impact in its operations and financial condition, and it may continue for few more quarters.
3) Company has experienced significant growth in its business in the recent years which may or may not continue in future.
4) Refer NCD prospectus for complete risk factors.
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Should you invest in IIFL Home Finance NCD of Tranche-I issue of July 2021?
Here are our views.
1) IIFL Home Finance NCDs are rated as AA / AA+ and offers high interest rates up to 10%. However, these NCDs are unsecured. Investment in unsecured NCDs is high risk.
2) One should not forget about NBFC crisis that started 3 years back. Your interest payment or repayment of capital might get delayed if invested in the NBFC companies.
3) Investing for long term of 7.25 years in these unsecured NCDs would be high risk as we do not know the company status in such long term.
If you are a high-risk investor and willing to consider all the risks indicated above, you can invest in these NCDs. I would re-iterate again that these are high risk, hence invest only a small portion in such investment options.
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These are unsecured subordinated NCDs and therefore risky and should be avoided particularly in view of precarious economic condition and growth risk due to pandemic and tapering off of the global stimulus packages some day in near future.
Under the resolution plan by Piramal, secured NCD holders of DHFL have to take almost 70% haircut. So secured or unsecured makes a difference only in paper, actually nothing..
Yes, I agree. In case of default and IBC coming into play, it does not make any difference whether your NCDs are secured or unsecured.
However, I am sure, IBC /CoC in case of DHFL would not have allowed the “same” 70% haircut both in case of secured as well as unsecured NCDs. If that had been the case, that’s the travesty of law/IBC/Coc proceedings.