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Indiabulls Housing Finance NCD offer review Sept 2016

Posted on Tuesday, September 13, 2016

Indiabulls Housing Finance NCD offer review Sept 2016

Indiabulls Housing Finance Ltd (IHFL) is the second largest housing finance company in the enjoying investors and users trust. The company is a non-deposit taking HFC registered with the NHB. We are also a notified financial institution under the SARFAESI Act. It focuses primarily on long-term secured mortgage-backed loans. It also offers housing loans and loans against property to its target client base of salaried and self-employed individuals and small and medium-sized enterprises and 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. The majority of IHFL's assets under management ("AUM") comprise housing loans, including in the affordable housing segment. For the Fiscal Year 2016, its housing loans were disbursed at an average ticket size of Rs. 2.5 million, with an average LTV ratio of 71% (at origination). As on 31.03.16 its consolidated net worth was Rs.10627 crore.

As of March 31, 2016, IHFL had offices spread across over 110 locations in India and two representatives offices in Dubai and London to target NRI clients. It has a pan-India presence across Tier I, Tier II and Tier III cities in India. Our network also allows us to interact with and service our customers at the local level whilst ensuring that credit decisions are taken only at regional hubs in accordance with defined internal parameters and protocols. As of March 31, 2016, it had a direct sales team of over 2,500 employees who were located across network. This sales team is instrumental in sourcing the majority of its customers. The company also relies on external channels, such as direct sales agents for referring potential customers. IHFL's consolidated borrowings as at March 31, 2016 were Rs. 610,853.1 million and standalone borrowings as at June 30, 2016 were Rs. 651,747.6 million, respectively.

As at March 31, 2016, 2015, and 2014, company's consolidated gross NPAs as a percentage of consolidated AUM were 0.84%, 0.85% and 0.83%, respectively, and consolidated net NPAs (which reflect our gross NPAs less provisions for NPAs, except counter-cyclical provision) as a percentage of consolidated AUM were 0.35%, 0.36% and 0.36%, respectively. As of March 31, 2016, 2015 and 2014, IHFL's standalone capital to risk (weighted) assets ratio ("CRAR") was 20.51%, 18.35% and 19.14%, respectively.

For the Fiscal Years 2016, 2015 and 2014, its consolidated revenue from operations was Rs.82,899.3 million, Rs.64,493.0 million and Rs. 54,064.0 million, respectively, and consolidated profit after tax before share of profit attributable to minority interest was Rs. 23,447.5 million, Rs. 19,012.4 million and Rs. 15,685.4 million respectively. Company's consolidated revenue from operations and consolidated profit after tax grew at a CAGR of 23.8% and 22.3%, respectively, from Fiscal Year 2014 to Fiscal Year 2016.

To meet its working capital requirement for onward lending, financing and repayment of costly debt with interest etc. the company is coming out with a debt offer of Secured and Un-secured Redeemable Non-convertible debentures of Rs. 1000 each with various coupon rates and tenures. Issue opens for subscription on 15.09.16 and will close on or before 23.09.16. The base size of the issue is Rs. 3500 crore with a green shoe option of retaining additional Rs. 3500 crore, thus making the aggregate size of the issue of Rs. 7000 crore. Allotment will be done on 'First come - First Served' basis. Minimum application is to be made for 10 NCDs and in multiple of 1 NCD thereon, thereafter. Coupon rates are ranging from 8.55 per cent to 9.15 per cent. Tenures are 3 years, 5 years and 10 years. Interest payment mode is Monthly, Yearly and Cumulative as per the choice of investors. Post this issue, its debt equity ratio will stand enhanced to 5.9 per cent from current 5.3 per cent. This debt offer is rated CARE AAA and BWR AAA. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk. Post allotment, NCDs will be listed on BSE and NSE.

Lead managers to this NCD offer are Yes Securities (India) Ltd., Edelweiss Financial Services Ltd., A K Capital Services Ltd., Axis Bank Ltd., IIFL Holdings Ltd., IndusInd Bank Ltd., SBI Capital Markets Ltd., Trust Investment Advisors Pvt Ltd. IDBI Trusteeship Services Ltd is the Debenture Trusee and Karvy Computershare Pvt Ltd is the registrar to the issue.

Conclusion: Triple 'A' rating with attractive coupon rate makes this offer worth for regular interest income as rate cut possibility is round the corner.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. As SME issues have entry barriers and having low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Corporate India, Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.

Email: dilip_davda@rediffmail.com


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