• By Elite Wealth
  • / November 30, 2022
  • / NCD

Indiabulls Housing Finance Limited (“IBHFL”) is a non-deposit-taking housing finance company (“HFC”) registered with the National Housing Board (“NHB”). It is also a notified financial institution under the SARFAESI Act. IBHFL focuses primarily on long-term secured mortgage-backed loans. IBHFL primarily offers housing loans and loans against property to a target client base of salaried and self-employed individuals and micro, small and medium-sized enterprises (“MSMEs”) and corporates. It also offers 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. IBHFL’s total assets under management (“AUM”) stood at Rs 73,047 crore as on June 30, 2022, the majority of which comprises housing loans, including in the affordable housing segment.

Indiabulls Housing Finance Limited (“IBHFL”) is coming out with a public issue of secured redeemable non-convertible debentures of the face value of Rs 1,000 each, (“NCDs”), for an amount up to ₹100 crores (“Base Issue Size”) a green shoe option of ₹900 crores aggregating up to ₹1000 crores as per Tranche IV Issue. The Issue offers yields ranging from 8.89% to 9.80% depending upon the Category of Investor and the Series applied for. The Tranche IV Issue shall be open from Thursday, 1st December 2022, to Thursday, 22nd December 2022, with an option to close earlier and/or extend up to a period as may be determined by the Securities Issuance Committee. A minimum of 75% of the Net Proceeds raised through this Tranche IV Issue will be utilized for the purpose of onward lending, financing, and repayment of interest and principal of existing borrowings of the Company, and the remaining 25% for general corporate purposes.

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    Indiabulls Housing Finance Limited NCD Details

    Tranche III Issue opens: 1st December 2022
    Tranche III Issue closes: 22nd December 2022
    Allotment: On a date, priority basis except on the day of oversubscription and thereafter, if any.
    Face Value: Rs.1,000 per NCD
    Nature of Instrument: Secured Redeemable Non-Convertible Debentures
    Minimum Application: 10 NCDs (Rs.10, 000) & in multiple of 1NCD
    Listing: Proposed on BSE and NSE. BSE shall be the Designated Stock Exchange for the Tranche IV Issue
    Credit Rating “ICRA AA/Stable” by ICRA Limited, “CRISIL AA/Stable” by CRISIL Ratings Limited.
    Tranche-III Issue Size Base Issue size of ₹ 100 Crore with an option to retain oversubscription up to ₹ 900 Crore aggregating up to ₹ 1000 crore

    Being the Tranche-IV Issue size.

    Depositories NSDL and CDSL
    Put and Call Option Not Applicable
       
    Category I – Institutional (“QIB”) II – Non-Institutional (“Corporates”) II – High Net worth

    Individual (“HNI”)

    (Amount aggregating to

    above ₹ 10 lakh)

    II – Retail Individual (“Retail”) (Amount aggregating up to and including ₹ 10 lakh)
    Category Allocation of the overall Issue Size 30% 10% 30% 30%

    Specific Terms of the Prospectus:

    The terms of the NCDs offered under the Issue are as follows:

    Series I II III IV V VI VII VIII
    Frequency of Interest Payment Annual Monthly Cumulative Annual Monthly Cumulative Annual Monthly
    Tenor 24 Months 24 Months 24 Months 36 Months 36 Months 36 Months 60 Months 60 Months
    Coupon Rate (% p.a.) for :
    Category I, & II 8.90% 8.57% NA 9.05% 8.70% NA 9.30% 8.94%
    Category III & IV 9.30% 8.94% NA 9.55% 9.16% NA 9.80% 9.39%
    Effective Yield (% p.a.) for :
    Category I & II 8.89% 8.90% 8.90% 9.04% 9.05% 9.05% 9.29% 9.30%
    Category III & IV 9.29% 9.30% 9.30% 9.54% 9.54% 9.55% 9.79% 9.80%
    Amount (₹ / NCD) on Maturity for ^ :
    Category I & II ₹ 1,000 ₹ 1,000 ₹ 1,186.20 Staggered redemption in three annual payments of: ₹ 333 for year 1; ₹ 333 for year 2; and ₹ 334 for year 3, starting from the first anniversary from the Deemed Date of Allotment Staggered redemption in three annual payments of: ₹ 333 for year 1; ₹ 333 for year 2; and ₹ 334 for year 3, starting from the first anniversary from the Deemed Date of Allotment ₹ 1,297.15 Staggered

    redemption in five

    annual payments of

    ₹ 200 each, starting

    from the first

    anniversary from the

    Deemed Date of

    Allotment

    Staggered

    redemption in five

    annual payments of

    ₹200 each, starting

    from the first

    anniversary from the

    Deemed Date of

    Allotment

    Category III & IV ₹ 1,000 ₹ 1,000 ₹ 1,194.95 Staggered redemption in three annual payments of: ₹ 333 for year 1; ₹ 333 for year 2; and ₹ 334 for year 3, starting from the first anniversary from the Deemed Date of Allotment Staggered redemption in three annual payments of: ₹ 333 for year 1; ₹ 333 for year 2; and ₹ 334 for year 3, starting from the first anniversary from the Deemed Date of Allotment ₹ 1,315.10 Staggered redemption in five annual payments of ₹ 200 each, starting from the first anniversary from the Deemed Date of Allotment Staggered redemption in five annual payments of ₹ 200 each, starting from the first anniversary from the Deemed Date of Allotment

    Category III and IV of Investors who are also holders of NCD(s)/bond(s) previously issued by the Company, and/or its Subsidiaries, and/or are equity shareholder(s) of Indiabulls Housing Finance Limited on the Deemed Date of Allotment and applying in Series I, Series III, Series IV, Series VI, Series VII and/or Series VIII shall be eligible for an additional incentive of 0.25% p.a. provided the NCDs issued under the proposed Tranche III Issue are held by the investors on the relevant Record Date applicable for payment of respective coupons.

     

    Indiabulls Housing Finance Limited NCD

    Application form

    Strengths of the company:

    • IBHFL has a Sizeable presence in the retail mortgage finance segment with a total AUM standing at Rs 73,047 crore as on June 30, 2022. The share of housing loans within the overall AUM continues to increase and was at 71% as on June 30, 2022, as compared to 50% as on March 31, 2015. IBHFL’s return on assets (RoA) improved to 1.3% during fiscal 2022 and 1.5% in the quarter ended June 30, 2022, from 1.2% for fiscal 2021.

    • IBHFL is a well-capitalized HFC with a strong financial track record. In the three months ended June 30, 2022, the consolidated profit for the period was ₹286.64 crores and the consolidated profit for the fiscal year ended 2022 was ₹1,177.74 crores. As of March 31, 2022, the standalone CRAR, computed in accordance with the applicable laws, was 22.49%, as against the regulatory minimum requirement of 15%.

    • IBHFL has a long-term credit rating of “AA; Outlook Stable” from CRISIL and ICRA. Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk*.

    Risk factors:

    • Any increase in the levels of non-performing assets (“NPAs”) in the Loan Book, for any reason whatsoever, would adversely affect the business, results of operations, cash flows, and financial condition.

    • Asset-quality risks arising from a sizeable large-ticket commercial credit portfolio of Rs 9,065 crore as on June 30, 2022, persist and could impact the company’s portfolio performance. Given the chunkiness of loans (average ticket size of Rs 150 crore), even a few large accounts experiencing stress could impact asset quality.

    • IBHFL is vulnerable to volatility in interest rates and it may face interest rate and maturity mismatches between the assets and liabilities in the future which may cause liquidity issues.

    • Deterioration in asset quality with gross NPAs increasing to more than 3.5% over an extended period, thereby also impacting profitability

    Conclusion:

    With the rise of interest rates in the economy, debenture public issues are obligated to offer attractive yields to their investors. This Issue by Indiabulls Housing Finance Limited (“IBHFL”) offers yields ranging from 8.64% to 9.54% depending upon the Category of Investor and the Series applied for, which is a bit in line with the debt market trends. While the credit rating offered is “ICRA AA/Stable” by ICRA Limited, and “CRISIL AA/Stable” by CRISIL Ratings Limited, the deterioration in asset quality with gross NPAs increasing to more than 3.5% over an extended period raises concerns. Hence, informed investors may invest for a regular income as per the coupon rate offered. Since Demat is mandatory for the investment into this particular NCD from IBHFL, so the investor must open a Demat account with a trusted broker like Elite Wealth.