10.15% Indiabulls Housing Finance NCD issue – Mar-2023 – Is it a Safe Bet for Fixed Income Investors?
Indiabulls Housing Finance Limited is coming up with secured NCD bonds issue which would open for subscription on 3rd March, 2023. Indiabulls Housing Finance Limited is one of the leading housing finance company (HFCs) in India in terms of AUM. The NCD interest rates for Indiabulls Housing Finance NCD are up to 10.15%. These NCDs have a tenure of 24 months to 60 months. Interest is paid either monthly or yearly or on maturity. Should you invest in Indiabulls Housing Finance NCD’s of March, 2023 issue? What are the risk factors one should consider before investing in such high risk NCDs?
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About Indiabulls Housing Finance Limited
Company is one of the largest housing finance companies (HFCs) in India in terms of AUM. They are a non-deposit taking HFC registered with the NHB.
Company primarily focuses on long-term secured mortgage-backed loans. Majority of its loan book comprises of secured loans. They primarily offer housing loans and loans against the property to its target client base of salaried and self-employed individuals and micro, small and medium-sized enterprises. They also offer mortgage loans to real estate developers in India in the form of lease rental discounting for commercial premises and construction finance for the construction of residential premises.
Indiabulls Housing Finance NCD – Issue details
Here are the issue details.
|Security Type||Secured, Redeemable and Non-Convertible NCDs|
|Issue Size (Base)||Rs 100 Crores|
|Issue Size (Oversubscription)||Rs 800 Crores|
|Total Issue Size||Rs 900 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|
These are allotted on first come first serve basis. The issue can be closed earlier if it is oversubscribed before the closure date.
NRI’s cannot apply to this NCD subscription.
Edelweiss Financial Services, AK Capital Services, IIFL Securities and Trust Investment Advisors are the lead managers for the issue.
Indiabulls Housing Finance NCD – Interest rates
As per the Indiabulls Housing Finance NCD prospectus filed with SEBI, here are the Indiabulls Housing Finance interest rates for Category III and IV investors (including retail investors).
|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)||9.65%||9.25||NA||9.90%||9.48%||NA||10.15%||9.71%|
|Effective Yield (% per Annum)||9.64%||9.64%||9.65%||9.88%||9.89%||9.90%||10.14%||10.15%|
|Amount on Maturity (In Rs.)||1,000||1,000||1,000||Staggered*||Staggered*||1,309||Staggered**||Staggered**|
* Staggered Redemption in Three (3) annual payments of ₹ 333 for year 1, ₹ 333 for year 2 and ₹ 334 for year 3 starting from 1st Anniversary* until Maturity
** Staggered Redemption in Five (5) annual payments of ₹200 each, starting from 1st Anniversary* until Maturity
Indiabulls Housing Finance NCD – 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 – Rs 2,165 Crores
Year ending Mar-2021 – Rs 1,201 Crores
Year ending Mar-2022 – Rs 1,177 Crores
Indiabulls Housing Finance NCD – Why to invest?
1) Indiabulls Housing Finance bonds offer attractive interest rates where investors can get interest up to 10.15% per annum.
2) It issues secured NCDs. Secured NCDs are safe compared to unsecured NCDs. In case 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 Housing Finance NCD – Why not to invest?
1) Company profits are on declining mode.
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) Increase in NPAs can affect the business.
4) Refer prospectus for complete risk factors.
How to subscribe to these NCDs?
This issue is available in only in demat form. You can login to your demat account, check for NCD section and look for these NCD links and apply for the same. For more information on this you can refer prospectus.
Also Read: 5 Debt Mutual Funds with Highest SIP Returns (8% to 9%)
Indiabulls Housing Finance NCD – Should you invest or avoid?
Recently banks and NBFC’s have increased FD interest rates. However, Indiabulls Housing Finance NCDs still offer high interest rates and yield. Indiabulls Housing NCD rating is AA Stable by CRISIL and ICRA, which are considered as good quality rating.
On the other hand, such credit ratings can change at any time. Investors should not forget what happened in some of the companies like DHFL where NCD investor money was lost. There are also many occasions where NBFC’s have delayed the interest payment and repayment of investment amount to investors.
Since these are secured NCDs, the element of risk is reduced to some extent. High risk investors can invest in these secured NCDs after considering all these risk factors.
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I think a AA rated company with 10.15% yield and staggered repayment (thereby reducing your risk to that extent with each passing year) is a good proposition with limited investment.
I have read it somewhere that they are giving an additional interest of 0.25% to existing bondholders.
I do not know how can one avail the additional 0.25% interest rate incentive in case of existing bondholders. Because the application form does not capture this information. Is it a marketing gimmick because if the application form does not capture this information, then, this eligibility will not be processed.
Prospectus page no. 570 indicates below about additional incentive, however only for those who purchased through allotment and not from secondary market.
The additional incentive will be maximum of 0.25% p.a. for Category III and IV Investors in the proposed Tranche V Issue, who are also Primary Holder(s)on the deemed date of allotment.
NCD Holders, (based on their DP identification and /or PAN and/or entries in the Register of NCD Holders) and make the requisite payment of additional incentive. The additional incentive will be given only on the NCDs allotted in this Tranche V Issue i.e., to the Primary Holder(s). In case if any NCD is bought/acquired from
secondary market or from open market, additional incentive will not be paid on such bought/acquired NCD.
Sir, thank you so much for your such detailed reply.
Many many thanks for such detailed reply.
Write some article on Credit Rating Agencies where they gave good rating though NBFCs defaulted on the payment (case of DHFL).
On trust worthiness of Credit Rating Agencies…