On account of low Bank interest rates and absence of any tax-free bonds issue, NCD issues like Dewan Housing Finance Corporation Limited (DHFL) Tranche I as well Tranche II and Edelweiss Housing Finance Ltd. NCD. DHFL have evoked good interest from institutions and investors. Others like Srei Infrastructure Finance Ltd’s (SIFL) issue have met with a cold response. Indiabulls Housing Finance (IHFL) has come out with a public issue of non-convertible debentures (NCDs) with base issue size of Rs. 3,500 crore with an option to retain over subscription of up to Rs 3,500 crore thus making the issue size at 7000 crore. This is first-ever issue of non-convertible debentures (NCDs) for retail customers from India bulls Housing Finance Ltd.
Issue: opens on September 15 and closes on September 23opens on 7th September 2016 ; Closes on 28th September 2016 – First come First basis
Lead Managers : Yes Securities (India) Limited, Edelweiss Financial Services Limited, A.K. Capital Services Limited, Axis Bank Limited, IIFL Holdings Limited, IndusInd Bank Limited, SBI Capital Markets Limited, and Trust Investment Advisors Private Limited.
RATING : “CARE AAA” by CARE and “BWR AAA” by Brickwork
As on date, NCDs account for 40 per cent of the total liabilities of IHFL. Over the next two-three years, the company plans to increase the share of NCDs to 60 per cent. .
Notable points about the company are :
- Indiabulls Housing Finance Ltd was incorporated on May 10 2005. The company provides home loans and loans against property
- The company is headquartered in New Delhi.
- In December 28 2005 the company was registered to carry on the business of a Housing Finance Institution but does not have permission from the National Housing Bank to accept public deposits.
- Indiabulls Housing Finance Ltd operates as a subsidiary of Indiabulls Financial Services Ltd.In 2014 the Company has been awarded as the Fastest Growing Housing Finance Company of the Year 2013-14 by NAREDCO. In 2015 the company has acquired about 40 per cent stake in UK-based Oak North Bank for USD 100 million (Rs 660 crore). The company was awarded `Best Housing Finance Company’ by Realty Plus and `Best Affordable Housing Finance Company of the Year’ by ASSOCHAM
- The company is expanding its overseas presence with the launch of its first representative office in Dubai.
NCD Offer Details:
The object of the proposed issue is to further diversifying the borrowings of IHFL , reduce the cost of funds and also take advantage of the growth opportunities
The secured NCD comes with an option of three-, five- and 10-year tenures whereas unsecured NCDs have a tenure of 10 years.
The annual yield ranges from 8.55% to 9.15% with monthly, cumulative and annual options for investors.
- Senior citizensapplying for Rs.10 Lakh or less will get 0.10% higher interest rate.
- Tax will not be deducted at source if NCDs are held in demat mode
- Recently listed DHFL bonds which are AAA rated are trading at a discount, Hence listing gains in this bond are ruled out.
- In the scenario of falling interest rates, this NCD is good option for passive investors. But as NCDs are taxable, thus the return get reduced by marginally. So for the investors falling in high tax bracket of 20-30%, investing in NCDs does not make sense at all.
- With upfront brokerage from brokers in range 1%, debt issues have also been attracting people looking for short term returns. However recent tepid listing of DHFL bonds is likely to act as a dampener.
- Those who do not like to purchase from secondary debt market (listed) and are in low tax bracket, can invest small amount in the NCD .