India Infoline Housing Finance (IIHFL) 11.52% NCDs – December 2013 Issue

by Shiv Kukreja on December 10, 2013

in Uncategorized

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 [email protected]

After India Infoline Finance Limited (IIFL), the 98.87% subsidiary of India Infoline Limited (IIL), successfully raised Rs. 1,050 crore from its 12% NCD issue in September this year, its own wholly owned subsidiary India Infoline Housing Finance Limited (IIHFL) has now come up with its issue of non-convertible debentures (NCDs).

Before we check out more about the company and its financials, let’s take a look at some of the main features of the issue first.

Coupon Rate – The issue is simply uncomplicated. It is offering only one choice of coupon rate i.e. 11.52% per annum payable monthly and that too, only for 60 months. Effective yield comes out to be 12.15% per annum. But, mind it that it is taxable as per the tax slab of the investor and is also subject to TDS, if taken in physical form.

Size of the Issue – Base size of the issue is Rs. 250 crore and the company has the right to exercise the green-shoe option to retain oversubscription to the tune of another Rs. 250 crore, thus making it a Rs. 500 crore issue.

NRI Investment – Non-Resident Indians (NRIs) are not allowed to invest in this issue.

Opening/Closing Date – The issue is scheduled to open on Thursday, 12th of December and will remain open for subscription for just 7 working days to close on Friday, 20th of December. The company has the option to close it earlier or extend it beyond the closing date, depending on the investors’ response to the issue.

Minimum Investment – If you want to subscribe to this issue, you need to invest at least Rs. 10,000 i.e. 10 NCDs worth Rs. 1,000 each.

Listing – The company has decided to list these NCDs on the National Stock Exchange (NSE) as well as on the Bombay Stock Exchange (BSE) and the listing will happen within 12 working days from the closing date of the issue.

Demat A/c. Not Mandatory – Though these NCDs will get listed on the stock exchanges, it is not mandatory to have a demat account to invest in this issue. You can subscribe for these NCDs in physical form as well, like you invest in bank fixed deposits (FDs) or post office schemes.

Only the investors, who subscribe for it in demat form, will be able to sell/trade them on the stock exchanges and will not be subject to any TDS on the interest income.

No Put/Call Option – The investors subscribing for these NCDs in physical form will have no option to redeem/sell them before maturity, as the company has not given put option to its investors. At the same time, the company will not be able to call its option to return investors’ money before the maturity period.

Credit Rating – CRISIL and CARE have been appointed as the credit rating agencies and have rated the issue as ‘AA-/Stable’ and ‘AA-’ respectively.

Categories of Investors – The company has decided to categorise investors in the following three categories:

Category I – Qualified Institutional Bidders (QIBs)

Category II – Non-Retail Investors including HUFs, Corporates etc.

Category III – Retail Investors including HUFs investing Rs. 10 lakh or below

Category Reservation – 50% of the issue size i.e. Rs. 250 crore, has been reserved for Category III retail investors, 35% i.e. Rs. 175 crore for Category II non-retail investors and 15% i.e. Rs. 75 crore for Category III institutional investors.

Allotment on FCFS Basis – As with most of these issues, allotment in this issue will be made on a first come first serve (FCFS) basis.

Interest Payment Date – IIHFL has decided to pay interest on the investors’ money on a monthly basis, but has not fixed the date of interest payment as yet. Interest payment will start from one month after the deemed date of allotment and will keep on getting paid on the same date every month.

Profile & Financials of India Infoline Housing Finance Limited (IIHFL)

India Infoline Housing Finance Limited (IIHFL) is a wholly owned subsidiary of India Infoline Finance Limited (IIFL), which is a 98.87% subsidiary of India Infoline Limited (IIL). As its name clearly indicates, the company offers housing loans and loans against property (LAP).

IIHFL received the certificate of registration from the National Housing Bank (NHB) to carry on the business as a Housing Finance Company (HFC) on February 3, 2009, which makes it a company with short operational history.

To measure the scale of its operations, I tried to do some comparison of its financials with that of its parent company, IIFL and IIL, the parent company of IIFL. Here are certain tables which carry some relative data for comparison:

These tables clearly show that IIHFL is a very small company relative to IIFL and IIL. Also, though the company deals in secured financing only, which ensures lower NPAs and lesser recovery related problems, its business model is very much concentrated to a single segment i.e. housing loans and loans against property. This makes it more vulnerable to adverse market conditions including intense competition, an economic downturn or a sudden downward movement in real estate prices.

IIFL, in its September issue, offered coupon rates of 12% per annum. It is really surprising for me to see the parent company offering higher rate of interest and its subsidiary, of a much smaller size, offering a lower rate of interest @ 11.52% per annum.

Personally, I won’t put my money into this issue and won’t advise any of my clients either, except somebody who is not liable to pay any taxes and wants regular income on a monthly basis.

Application Form for IIHFL 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 IIHFL NCDs, you can contact me at +919811797407

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