Indiabulls Commercial Credit Limited is coming up with a secured NCD bond issue which would open for subscription on 3rd April, 2023. Indiabulls Commercial Credit Limited is a non deposit taking NBFC company and is a subsidiary of Indiabulls Housing Finance Limited. The NCD interest rates for Indiabulls Commercial Credit NCD are up to 10.5%. These NCDs have a tenure of 24 months to 60 months. Interest is paid either monthly or yearly or on maturity. There is a major negative part in these NCDs, and I am sure as usual none of the financial websites would cover this. Should you invest in Indiabulls Commercial Credit NCDโs of April, 2023 issue? What are the risk factors one should consider before investing in such high risk NCDs?
About Indiabulls Commercial Credit Limited
Delhi based Indiabulls Commercial Credit Limited is a non-deposit-taking NBFC. It is a 100% subsidiary of Indiabulls Housing Finance Limited, which is one of the largest housing finance companies in India.
The company’s primary focus is on long-term secured mortgage-backed loans. The offerings of the company can be categorized as:
- Retail mortgage loans to self-employed individuals, proprietorships, and small businesses
- Corporate mortgage loans to developers of residential projects
Indiabulls Commercial Credit NCD Apr-2023 – Issue details
Here are the issue details.
| Opening Date | 03-Apr-23 |
| Closure date | 19-Apr-23 |
| Security Type | Secured, Redeemable and Non-Convertible NCDs |
| Issue Size (Base) | Rs 200 Crores |
| Issue Size (Oversubscription) | Rs 800 Crores |
| Total Issue Size | Rs 1,000 Crores |
| Issue price | Rs 1,000 per bond |
| Face value | Rs 1,000 per bond |
| Minimum Lot size | 10 bonds and 1 bond there after |
| Tenure | 24 to 60 months |
| Interest Payment frequency | Monthly, yearly or on maturity |
| Listing on | Within 6 working days on BSE/NSE |
What is Staggered redemption in these NCD?
These are unique NCDs. These NCDโs do not have a maturity date like other NCDs. There is a Staggered redemption concept in these NCDs. Each NCD is split into 3 parts or 5 parts.
Staggered redemption in 3 parts means – Staggered Redemption in Three (3) Annual payments of โน 333 for the year 1, โน 333 for year 2 and โน 334 for the year 3 starting from 1st Anniversary**ย until Maturity
Staggered redemption in 5 parts means – Five (5) annual payments of โน 200 each, starting from 1st Anniversary** until Maturity
Indiabulls Commercial Credit NCD – Interest rates
As per the Indiabulls Commercial Credit Apr-23 NCD prospectus filed with SEBI, here are the Indiabulls Commercial Credit interest rates for Category III and IV investors (including retail investors).
| Series –> | I | II | III | IV | X | VI | VII | VIII |
|---|---|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Annual | Monthly | Cumulative | Annual | Monthly | Cumulative | Annual | Monthly |
| Tenor (in months) | 24 | 24 | 24 | 36 | 36 | 36 | 60 | 60 |
| Coupon (% per Annum) | 10.00% | 9.57% | NA | 10.28% | 9.80% | NA | 10.50% | 10.03% |
| Effective Yield (% per Annum) | 9.98% | 9.99% | 10.00% | 10.23% | 10.24% | 10.25% | 10.49% | 10.50% |
| Amount on Maturity (In Rs.) | 1,000 | 1,000 | 1,201 | Staggered* | Staggered* | 1,322 | Staggered** | Staggered** |
* Staggered Redemption in Three (3) annual payments of โน 333 for year 1, โน 333 for year 2 and โน 334 for year 3 starting from 1st Anniversary* until Maturity
** Staggered Redemption in Five (5) annual payments of โน200 each, starting from 1st Anniversary* until Maturity
Indiabulls Commercial Credit NCD โ Credit Ratings
These NCDs have been rated as CRISIL AA / Stable by CRISIL Ratings and ICRA AA Stable by ICRA. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
How is the company doing in terms of profits?
Here are the details of the consolidated profits of the company.
Year ending Mar-2020 โ Rs 19.8 Crores
Year ending Mar-2021 โ Rs 139 Crores
Year ending Mar-2022 โ Rs 508.2 Crores
Indiabulls Commercial Credit NCD – Why to invest?
1) Indiabulls Commercial Credit bonds offer attractive interest rates where investors can get interest up to 10.5% per annum.
2) It issues secured NCDs. Secured NCDs are safe compared to unsecured NCDs. In case a company gets wind-up/shut down for some reason, secured NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence, it is safe to invest in such secured NCD options.
3) Company has a good credit rating of AA/Stable from CRISIL and ICRA.
Indiabulls Commercial Credit NCD – Why not to invest?
1) High level of customer defaults and resultant increase in NPAs can affect company business.
2) Recent outbreaks of the covid-19 and lockdowns have an impact on company business. Any such outbreaks in the future cannot be predicted and can have an impact on the operations of the company.
3) There are several NBFC companies that defaulted or delayed payment of investorsโ money earlier, hence investment in NBFC company NCD bonds is always riskier.
4) Refer prospectus for complete risk factors.
Indiabulls Commercial Credit NCD โ Should you invest or avoid?
Recently, banks and NBFCโs have increased FD interest rates. However, Indiabulls Commercial Credit NCDs still offer high interest rates and yield. These NCD rating is AA Stable by CRISIL and ICRA, which is considered as a good credit rating.
On the other hand, for some of the series of these NCDs, the repayment of principal amount is done in 3 or 5 installments. Investors are interested to invest small amounts and get a lump sum, but not that they invest lumpsum and get capital in installments.
High risk investors who understand all the risk factors of investing in NBFC companies can invest in these NCDโs for series which are under non-staggered redemption.
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Sir,
Whether the additional interest @ 0.25% is applicable in case of primary holders of earlier public issue of NCD by the Company and/or by its parent company, i.e. Indiabulls Housing Finance Ltd.
I could not see anything about this in NCD prospectus
Sir,
Have been following your posts for sometime. They provide good insights.
However I urge bit of deeper analysis on the why/why not to invest sections of NCDs.
I find that templatized reviews are provided for most offerings
Hello Sharan. I cannot create reasons under section “Why to invest or why not to invest”. These are taken majorly from NCD prospectus filed by the company on SEBI website. Along with them, I need to capture industry level risks too. e.g. who thought DHFL would be under scam. Who thought major NBFC companies delays payments of both principal and interest. These are not captured on NCD prospectus as these are industry level risks which can come to any NBFC company. Hence it is my duty to not only cover company level risks, but also risks which I feel can affect all companies in same industry.
However, point taken, would try to see if I can cover more company level risks too along with industry level risks.
1. As per some people, investment with staggered repayment reduces your risk, as the part repayment received reduces risk, while your observation states that “Investors are interested to invest small amounts and get a lump sum, but not that they invest lumpsum and get capital in installments” remains a fundamental and basic characteristic of any investment. However, retired people who seek regular flow of interest income, would prefer this mode of investment.
2. While this company is also into “long-term secured mortgage-backed loans”, whereas Indiabulls Housing Finance is also into “long-term secured mortgage-backed loans”. So what is the difference of fine difference between these two companies – holding and subsidiary company.
First of all these are NBFC NCDs which are high risk. Ideally retired investors should not opt this, hence there is no question that staggered redemption would benefit them. This is my personal opinion and might differ from others.