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Reliance Home Finance Ltd (RHFL) NCD Offer Review

Published on Wednesday, December 21, 2016 by Dilip Davda

Reliance Home Finance Ltd (RHFL) NCD Offer Review

Reliance Home Finance Ltd (RHFL) is a wholly owned subsidiary of Reliance Capital Ltd and is engaged in lower middle and middle income group housing finance segment. It is registered with National Housing Bank (NHB).

For the purpose of onward lending, financing, and for repayment/ prepayment of interest and principal of existing borrowings of the Company, it is coming out with a maiden NCDs (of Rs. 1000 each) issue of Rs. 3500 crore shelf limit. The base amount is Rs. 1000 crore Secured NCDs and the green shoe option is Rs. 2000 crore for secured NCDs and Rs. 500 crore for Un-Secured NCDs. Quota reserved for QIBs (30%), Corporate (10%), HNIs (30%) and Retail (30%). The company offers coupon rates ranging from 8.70 per cent to 9.15 per cent depending upon tenure of 3, 5 and 10 yrs. For 15 years NCDs it will offer 0.25 step-up incentives in absence of call option after 10 years term that will be under unsecured category. Secured NCDs does not have Step-Up/Step-Down options. NCDs are available in demat and physical mode, however, trading will take place only in demat mode. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiple of 1 NCD thereon, thereafter. Interest will be paid on Annual basis for all options. Issue opens for subscription on 22.12.16 and will close on or before January 06, 2017. Post allotment, NCDs will be listed on BSE and NSE.

Secured NCDs up to Rs. 3000 crore is graded AA+/Stable by CARE and BWR and Un-Secured NCDs up to Rs. 500 crore is graded AA/Stable by CARE and BWR (indicating that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk) Lead managers to the issue are Edelweiss Financial Services Ltd, A K Capital Sercvices Ltd, Axis Bank Ltd., Trust Investment Advisors Pvt Ltd and Yes Securities (India) Ltd. IDBI Trusteeship Services Ltd is the Debenture Trustee and Karvy Computershare Pvt Ltd is the registrar to the issue.

Housing Finance sector is expected to show CAGR of around 18-20 per cent till 2020 and RHFL that has shown CAGR of 24 per cent plus for revenues and CAGR of 36 per cent for profit before tax is hopeful of maintaining the same. It has NPA around 1.2 per cent and is doing a business with a spread of around 3.7 per cent. As at 30.09.16, RHFL had AUM of Rs. 9383 crore spread at 100 locations through 43 branches.

Conclusion: Offers with "AA+/AA" ratings is preferred by investors in debt market. Hence this offer is worth considering for investment for steady interest income.

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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. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in new papers.

Email: dilip_davda@rediffmail.com


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