edelweisss housingIssue Details

Public Issue of Secured Redeemable Non-Convertible Debentures  by “Edelweiss Housing Finance Ltd.”

 Issue Date : opening on Friday, 8th July 2016 and closes on Wednesday, 27th July 2016- First come First basis
Lead Managers  : SBI Capital Markets and Edelweiss Financial Services
Issue Size :  250 crore with an option to retain over subscription upto Rs.250 crore

Rating  :  These NCD’s are rated as ICRA AA, BWR AA+ and ICRA AA.

About the Company

The Company was incorporated at Mumbai as Edelweiss Housing Finance Limited on May 30, 2008 as a public limited company. The Company is registered as a non deposit accepting housing finance company with the National Housing Bank under Section 29A of the National Housing Bank Act, 1987 and its ownership is depicted below

edelweiss holdings

Gross non-performing loans were 1.17% and 0.75% of total loans as on March 31, 2016 and March 31, 2015,

NCD Offer Details:

edelweiss NCD offer

The most popular NCD of these types is the series with monthly interest. Others are not traded frequently.  This corresponds to series V  of the offered NCD which offers 9.57% coupon rate which results in 10% annualized yield.

This offer can be compared with earlier offers from ECL finance, which is from same promoters with same AA rating.

Similar Listed NCDs of same group &  same AA Rating

 

  Series Interest Frequency Interest Rate % Face Value Market Price YTM % Annual Yield % Date of issue Issue Size Date of Redemption
ECL Finance N5 Monthly 12 1000 1099 9.18 9.57 June 2014 600 cr 26/4/2020
ECL Finance NB Monthly 10.15 1000 1020 9.67 10.11 Feb 2015 1200 cr 11/3/2020

As can be seen above the last offering from ECL finance which has coup[on rate of 10.15% payable monthly is trading at a TYM of 9.67% while the older issue trades at about 9.2% YTM. Thus this issue at 9.57% monthly interest option is not very attractive.

Assessment:

  • The debentures offered are secure which are inherently safer than unsecured debentures
  • The Bonds are rated AA, which is just OK and company is owned and has support of Edelweiss group which has record of decent profitability and professionalism
  • Past issues by ECL finance (monthly interest series) are traded regularly on stock exchanges and thus it is likely that there will be reasonable liquidity for this issue and series as well.
  • Issue is not very attractive as similar yield options are available in market at same risk level. However buying from the market entail additional brokerage charge and in that sense those seeking monthly income may put some amount in monthly interest series.
  • However as interest rates go down in medium term, those who need recurring monthly income can subscribe.
  • The offered Monthly series is for 120 moths which is a bit longer period.
  • With upfront brokerage from brokers in range of 0.5-1%, this issue can become slightly better in terms of yield than the yield on listed bonds. However in short run capital appreciation is not expected unless there are some fresh triggers like subsequent fall in interest rates.
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