Indiabulls Housing Finance Limited (IHFL) 9.15% Non-Convertible Debentures (NCDs) – September 2016 Issue

by Shiv Kukreja on September 12, 2016

in Investments

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Stock markets are trading expensive as there is a liquidity gush right now. However, no bad news is good news for the stock markets these days. Investors have no option but to take risks and invest in stock markets as all other asset classes seem unattractive at this point in time. But, is the future as bright as it seems to be? That is something nobody knows with certainty.

US markets celebrate every bad news for their economy these days as they want US Fed to stretch its rate hike trajectory as much as possible. They fear that a faster pace of rate hikes would make people to shift their money from stocks to bonds. But, I think bad macroeconomic scenario presents a gloomy picture for the stock markets in the medium to long term and it is not something which should be celebrated. If the current economic environment demands a rate hike, then it is better to do it sooner than postpone it due to some political compulsions.

However, to avoid risks and have a consistent stream of cash flows, investors prefer safer options like fixed deposits, post office schemes, bonds or non-convertible debentures (NCDs) and one such issue will be available for subscription from 15th September. Indiabulls Housing Finance Limited (IHFL) is launching its NCDs issue of Rs. 7,000 crore which carries interest rate in the range of 8.65% to 9.15%.

You will have the option to invest for an investment horizon of 3 years, 5 years and 10 years and it will carry monthly interest option as well if you keep money with them for the next 10 years.

Here are some of the salient features of this issue:

Size & Objective of the Issue – The company plans to raise Rs. 7,000 crore from this issue, including the green shoe option of Rs. 3,500 crore. The company plans to use at least 75% of the issue proceeds for its lending and financing activities and to repay interest and principal of its existing borrowings and a maximum of 25% of the issue proceeds for other general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.20% p.a. for a period of 3 years (36 months), 9.25% p.a. for 5 years (60 months) and 9.30% p.a. for 10 years (120 months). Investors will have the option to receive interest on a monthly, annual or cumulative basis.

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Additional 0.10% for Senior Citizens – IHFL will credit an additional 0.10% per annum to senior citizens who fall in Category IV i.e. who invest Rs. 10 lakh or less. This additional interest will be paid to those senior citizens whose name appear in the books as the bondholders on the Record Date. Such investors need to submit their self-attested copy of PAN as an additional KYC document irrespective of the mode of application, demat as well as physical.

Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have the below mentioned percentage fixed in the allotment:

Category I – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 1,400 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 1,400 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 2,100 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 2,100 crore

Allotment on First-Come First-Served (FCFS) and Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.

NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have rated this issue as ‘AAA’ with a ‘Stable’ outlook. ‘AAA’ rated debt instruments are considered to be the safest from credit default point of view. Series I-VII NCDs are ‘Secured’ in nature for which the investors have the right on certain assets of IHFL in case of any financial trouble. However, Series VIII-X NCDs are ‘Unsecured’ in nature and carry a marginally higher rate of interest with a difference of 0.15%.

Listing, Premature Withdrawal & Put/Call Option – IHFL NCDs will be listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 12 working days from the date the issue gets closed. There is no option to surrender these bonds back to the company for premature redemption as there is no ‘Put’ option embedded in the offer. However, if taken in demat form, the investors can always sell these bonds on the BSE or NSE.

Demat, Physical Application – Investors can apply for these NCDs either in demat form or physical or certificate form as it is not mandatory have a demat account to invest in these NCDs.

TDS – Interest income earned is taxable with these NCDs and the investors are required to pay tax on the interest income as per their respective tax slabs. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000. NCDs held in demat mode will not attract any TDS.

Should you invest in Indiabulls Housing Finance Limited (IHFL) NCDs?

With interest rates falling and demand for such NCDs rising, issuers are leaving no opportunities to trim down the interest rates on offer. Indiabulls Housing is offering interest rates which are lower than the rates DHFL offered last month. However, I think it is justified for IHFL to offer lower rates than DHFL as it is a bigger company with sound fundamentals and carries a better brand name as well.

But, that doesn’t make these NCDs attractive to me. I think these coupon rates are lower for me to invest with a private company and I would rather invest in tax-free bonds or debt mutual funds. However, the investors, who are not liable to pay any tax on their annual income or who fall in the 10% tax bracket, can consider investing in these NCDs. Also, if you think interest rates will fall further from here, even then it makes sense to invest in such NCDs as it will result in a capital appreciation of these NCDs.

Application Form – IHFL NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in Indiabulls Housing Finance Limited (IHFL) NCDs, you can reach us at +91-9811797407

{ 47 comments… read them below or add one }

abhinav September 12, 2016 at 5:52 PM

i will not invest as interest rate is not so attractive. will give it a passe

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Shiv Kukreja September 15, 2016 at 11:38 AM

Thanks for sharing Abhinav!

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Hemant September 12, 2016 at 6:34 PM

NCD by Indiabulls Housing Finance ltd of worth Rs 7,000 crore.
More info@ https://www.moneydial.com/ncd-indiabulls-housing-finance-ltd-worth-rs-7000-crore/

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MANIK September 13, 2016 at 11:42 AM

please contact me on below mentioned number for application.

9650019079

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ATUL SHAH October 25, 2016 at 2:54 PM

please give me BSE/NSE code of indiabulls NCD.

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MANIK JHA September 13, 2016 at 7:17 PM

please contact me for more details on manik.jha@indiabulls.com, please mention your name and mobile number in the mail.

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TCB September 14, 2016 at 8:55 AM

Dear Shiv,
Which tenure do you recommend ?
Is this company safe enough to invest in unsecured NCDs for 10 years ?
Thanks

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Shiv Kukreja September 15, 2016 at 11:38 AM

Hi TCB,
If I were to invest, I think I would have gone for Series III – 8.90% annual interest option. Also, it seems this company is safe for investment purposes. But, business dynamics can change with any company in the long run, so it is better to be diversified.

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Rajib Pradhan September 18, 2016 at 7:40 PM

You might be aware about Jignesh Saha of Fiancia Tech, prometer of NSEL. Who did anticipate its device if artifice? All want to yield multiple mangoes by a seed mango. But ensure, seed you buy is a right one. In this country, you cann’t repose faith on anybody.

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Vanita Samat September 15, 2016 at 1:43 AM

Thanks sir for the post.
In the end you mention that this ncd is not attractive to you and you would rather invest in tax free bonds.
But there are no bonds being issued in the market right now are there?

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Shiv Kukreja September 15, 2016 at 11:24 AM

Hi Vanita,
In the absence of fresh issues of tax-free bonds, one can buy them from the secondary markets.

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Vanita Samat September 17, 2016 at 12:38 PM

Hello Sir,
Average rate on NCD is 9 % whereas average rate in bonds is 7 % or thereabout.
Yes.one can buy bond from secondary market but the price will be higher than the offer price of 1000 ..so I am not able to understand why pay a higher price in which case earning will go below 7 % and prefer the secondary bonds over Ncds giving 9 % around.
P.S. I have written a comment on this thread yesterday afternoon but it is still awaiting moderation.

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Shiv Kukreja September 17, 2016 at 3:34 PM

Hi Vanita,
Tax-Free Bonds got issued by the government companies and that is the biggest comfort as far as investment safety in the long term is concerned. I can invest in government companies for 50 years, but would be reluctant to do so with Indiabulls Housing Finance or DHFL or SREI Infra. Moreover, 9% taxable return for the 30% tax-bracket investor works out to be 6.22%, which is lower than 7% or so.

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abhinav September 15, 2016 at 10:53 AM

india bulls housing Issue oversubscribed and it is closing today.

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Shiv Kukreja September 15, 2016 at 11:22 AM

Hi Abhinav,
It is oversubscribed as per its base issue size of Rs. 3,500 crore and not as per its total issue size of Rs. 7,000 crore. Moreover, there is no official announcement of its closure as yet. Retail subscription is low and it seems one should get 100% allotment if bid is placed today or tomorrow.

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KUMAR September 15, 2016 at 1:03 PM

hi Shiv, thanks. could you please share your views on the Kosamattam NCD that is open now. May be an article on that would be good. Also are there any more NCDs expected in Sept/Oct

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Shiv Kukreja September 15, 2016 at 3:13 PM

Hi Kumar,
I don’t follow Kosamattam Finance, so don’t know much about the company. Moreover, the issue is getting closed on 27th. India Infoline is planning an NCDs issue soon.

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vishal September 15, 2016 at 5:01 PM

whaen India Infoline NCDs issue coming i.e, expected date??
this month or next month

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Shiv Kukreja September 15, 2016 at 5:32 PM

No info as yet.

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KUMAR September 15, 2016 at 1:13 PM

hi Shiv,
today there was an article on ET about NTPC Bond issue which states the following. Any idea whether this offer was open to public? Did not see an option to apply for it in ICICIdirect.

On Thursday, NTPC received bids worth Rs 1,495 crore for its taxable secured non- convertible debenture issue of Rs 500 crore. The bid book was closed within 15 minutes, with the issue getting oversubscribed three times, the company said.

The ‘AAA’-rated issue of the power generator fetched Rs 670 crore and had a coupon of 7.47 per cent per annum.

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Shiv Kukreja September 15, 2016 at 3:55 PM

Hi Kumar,
NTPC issued its bonds on a private placement basis. The issue was not meant for the retail investors.

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Shiv Kukreja September 15, 2016 at 5:31 PM

Day 1 (September 15) Subscription Figures:

Category I – Rs. 4595 crore as against Rs. 1,400 crore reserved – 3.28 times
Category II – Rs. 9.61 crore as against Rs. 1,400 crore reserved – 0.01 times
Category III – Rs. 1,633.85 crore as against Rs. 2,100 crore reserved – 0.78 times
Category IV – Rs. 456.32 crore as against Rs. 2,100 crore reserved – 0.22 times
Total Subscription – Rs. 6,694.77 crore as against total issue size of Rs. 7,000 crore – 0.96 times

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Prashant Nehe September 15, 2016 at 8:28 PM

Dear Shiv,
You have mentioned that investing in Debt Mutual Funds is better option than to invest in IHFL NCDs. Can you suggest some good Debt Mutual Funds for investing in nest 10 years based on your knowledge and expertise ?
Thanks ..

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Shiv Kukreja September 17, 2016 at 3:21 PM

Hi Prashant,
There are various kind of debt funds and one should consult his/her financial advisor as per his/her risk profile, investment objective and time horizon.

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Shiv Kukreja September 15, 2016 at 11:50 PM

This NCDs issue closes tomorrow i.e. September 16th.

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Vanita Samat September 16, 2016 at 2:26 PM

Hello Sir,
I understand allotment is first come basis.
But if a institutional investor applies before a retail investor and retail category is not full..will he be given pref or the institutional investor because he applied first.

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Shiv Kukreja September 17, 2016 at 3:24 PM

Hi Vanita,
In your example, retail investor will be given the first preference.

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KUMAR September 16, 2016 at 9:44 PM

hi Shiv,
can you please the final subscription figures?

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Shiv Kukreja September 17, 2016 at 12:23 PM

Last Day (September 16) Subscription Figures:

Category I – Rs. 4,605 crore as against Rs. 1,400 crore reserved – 3.29 times
Category II – Rs. 9.78 crore as against Rs. 1,400 crore reserved – 0.01 times
Category III – Rs. 2,080.55 crore as against Rs. 2,100 crore reserved – 0.99 times
Category IV – Rs. 523.67 crore as against Rs. 2,100 crore reserved – 0.25 times
Total Subscription – Rs. 7,219 crore as against total issue size of Rs. 7,000 crore – 1.03 times

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Shiv Kukreja September 17, 2016 at 12:25 PM

This issue stands closed on September 16th.

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Vanita Samat September 19, 2016 at 10:17 AM

Shiv sir,
Do you write posts for IPOs too?

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Shiv Kukreja September 19, 2016 at 12:31 PM

How did you figure out Vanita?

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Vanita Samat September 19, 2016 at 12:56 PM

Really sir I am asking because until now only come across your NCD posts starting with edelweiss.
I want information on prudential IPO ..so wanted to read your post if you have one.

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Shiv Kukreja September 19, 2016 at 1:12 PM
Shiv Kukreja September 19, 2016 at 1:13 PM

You can subscribe to our free newsletter – https://feedburner.google.com/fb/a/mailverify?uri=onemint%2Ffeed

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Jinesh September 25, 2016 at 7:27 PM

Hi
I want to have the allotment details of the India bulls NCD please let me know about the date of the allotment and the status link of the allotment so that i can come to know.

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nitesh patel September 27, 2016 at 7:16 AM

listing and nse bse code please shiv

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Shiv Kukreja September 27, 2016 at 4:03 PM

Hi Nitesh,
Listing details are not announced by the company as yet.

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vishal September 27, 2016 at 10:35 AM

what can we expect listing price of ncd??

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Shiv Kukreja September 27, 2016 at 4:04 PM

Hi Vishal,
It should list below its issue price.

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Shiv Kukreja September 27, 2016 at 3:59 PM

Indiabulls Housing Finance Limited (IHFL) 9.15% NCDs – Basis of Allotment & Allotment Status – http://www.onemint.com/2016/09/27/indiabulls-housing-finance-limited-ihfl-9-15-ncds-basis-of-allotment-allotment-status/

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Shiv Kukreja September 28, 2016 at 11:08 AM

Indiabulls Housing Finance (IHFL) NCDs to get listed on the BSE & the NSE today i.e. September 28th – http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20160927-24

Here are the BSE and the NSE codes for the same:

8.70% 3-year NCDs – Annual Interest – BSE Code – 935846, NSE Code – N3
8.70% 3-year NCDs – Cumulative Interest – BSE Code – 935848, NSE Code – N4
8.90% 5-year NCDs – Annual Interest – BSE Code – 935852, NSE Code – N6
8.90% 5-year NCDs – Cumulative Interest – BSE Code – 935854, NSE Code – N7
8.65% 10-year NCDs – Monthly Interest – BSE Code – 935856, NSE Code – N8
9% 10-year NCDs – Annual Interest – BSE Code – 935860, NSE Code – NA
9% 10-year NCDs – Cumulative Interest – BSE Code – 935862, NSE Code – NB
8.79% 10-year NCDs – Monthly Interest – BSE Code – 935864, NSE Code – NC
9.15% 10-year NCDs – Annual Interest – BSE Code – 935868, NSE Code – NE
9.15% 10-year NCDs – Cumulative Interest – BSE Code – 935870, NSE Code – NF

Deemed date of allotment has been fixed as September 26, 2016. Annual interest will be paid on September 26th every year. Monthly interest will be paid on 26th of every month starting October 26th, 2016.

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abhinav September 28, 2016 at 12:46 PM

no liquidity at all on the listed NCD…it seems NCD are loosing there sheen for retail investors .

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Vanita Samat October 7, 2016 at 12:33 AM

Sir,
Endurance technologies IPO ..
Should one subscribe or avoid it?

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Vikas Das November 15, 2016 at 2:39 PM

Hi, very informative article.
I am a prospective investor and was looking for profitable options to invest. I wanted your views about Peer to peer lending and is it a viable option to invest?

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Shilpa Kamble January 17, 2017 at 4:46 PM

i have already invested in Non convertible debenture, so i wanted to ask you something related to you

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Shiv Kukreja January 17, 2017 at 6:32 PM

Hi Shilpa,
You can mail me on my email id – skukreja@investitude.co.in

Reply

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