10.75% Indiabulls Housing Finance NCD – Sep-2023 – Details and Review
Indiabulls Housing Finance Limited is coming up with secured NCD bonds issue which would open for subscription on 6th September, 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 10.75%. These NCDs have a tenure of 24 months to 120 months. Interest is paid either monthly or yearly or on maturity. Should you invest in Indiabulls Housing Finance NCD’s of September, 2023 issue? What are the risk factors one should consider before investing in such high risk NCDs?
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.
|Subscription opening Date||06-Sep-23|
|Subscription closure Date||20-Sep-23|
|Issuing Security Name||INDIABULLS HOUSING FINANCE LIMITED|
|Security Type||Secured, Redeemable and Non-Convertible NCDs|
|Issue Size (Base)||Rs 100 Crores|
|Issue Size (Option to retain over subscription)||Rs 100 Crores|
|Total issue size||Rs 200 Crores|
|Issue price||Rs 1,000 per bond|
|Face value||Rs 1,000 per bond|
|Series||I to XII|
|Minimum Lot size||10 bonds and 1 bond there after|
|Tenure||24 to 96 months|
|Interest Payment frequency||Monthly, Annual and Cumulative|
|Listing on||Within 6 working days on BSE|
|Lead Manager||Nuvama Wealth Management, Elara Capital India and Trust Investment Advisors|
|Debenture Trustee/s||IDBI Trusteeship Services Limited|
* These are allotted on first come first serve basis. The issue can be closed earlier if it is oversubscribed before the closure date.
Indiabulls Housing Finance Sep-23 NCD – Interest rates
As per the Indiabulls Housing Finance NCD Sep-23 prospectus filed with SEBI, here are the Indiabulls Housing Finance interest rates for Category III and IV investors (including retail investors). Investors should note that for specific tenure NCDs’ the principal amount is repaid in installments which is the biggest drawback in these NCDs. See the redemption schedule comment below the table.
|Frequency of Interest Payment||Annual||Monthly||Cumulative||Annual||Monthly||Cumulative||Annual||Monthly||Annual||Monthly||Annual||Monthly|
|Coupon (% per Annum)-III & IV investors||9.65%||9.25%||NA||9.90%||9.48%||NA||10.15%||9.71%||10.50%||10.03%||10.75%||10.25%|
|Effective Yield (% per Annum)-III and IV investors||9.64%||9.64%||9.65%||9.88%||9.89%||9.90%||10.14%||10.14%||10.49%||10.49%||10.74%||10.74%|
|Amount on Maturity (In Rs.)||1,000||1,000||1,202||*||*||1,328||**||**||***||***||****||****|
* Staggered Redemption in Three (3) annual payments of ₹ 333.33 for year 1, ₹ 333.33 for year 2 and ₹ 333.33 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
*** Staggered Redemption in Seven (7) annual payments of ₹142.86 each, starting from 1st Anniversary* until Maturity
**** Staggered Redemption in Ten (10) annual payments of ₹100 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
- Year ending Mar-2023 – Rs 1,129 Crores
Indiabulls Housing Finance NCD – Why to invest?
- Indiabulls Housing Finance bonds offer attractive interest rates where investors can get interest up to 10.75% per annum.
- 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.
- Company has a good credit rating of AA/Stable from CRISIL and ICRA.
Indiabulls Housing Finance NCD – Why not to invest?
- Company profits are on declining mode.
- 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.
- Increase in NPAs can affect the business.
- Refer prospectus for complete risk factors.
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. Some of the series of the NCD’s offer repayment of capital in installments. Some argue this is good and some criticize this is bad. For me this is a biggest drawback as you invest lumpsum, but get redemption in installments.
- 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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