Edelweiss Housing Finance NCD offer review

Published on Tuesday, July 5, 2016 by Dilip Davda

Edelweiss Housing Finance Ltd (EHFL) a subsidiary of Edelweiss group is coming out with a maiden debt offer. EHFL aims to be a non-banking financing institution aspires to become lender for retail home loans and SMEs, particularly in Tier II cities. To retire its high cost debt upto Rs. 150 crore and to meet growing demand of funds for its network expansion, the company is coming out with a Secured NCD offer of Rs. 1000 each to mobilize Rs. 250 crore with a green shoe option to retain oversubscription to the tune of hundred percent and thus making the aggregate size of Rs 500 crore. Issue opens for subscription on 05.07.16 and will close on or before 27.07.16.

Minimum application is to be made for 10 NCDS (i.e. Rs. 10000) and in multiples of 1 NCD (i.e. Rs. 1000) thereon, thereafter. No put or call option is available for this offer. The rate of return offered is 9.50% (three years), 9.75% (five years) and 10% (10 years). Allotment is available in demat as well as physical mode as per the choise of investors. However, trading will take place only in demat mode. For 10 years term, monthly interest option is available.

Issue is lead managed by SBI Capital Markets Ltd., Edelweiss Financial Services Ltd and IDBI Trusteeship Ltd is the debenture trustee. Karvy Computershare Pvt Ltd is the registrar to the issue. Post allotment, NCDs will be listed on BSE and NSE. Issue is rated as CARE AA by CARE and ICRA and AA+ by BWR. The rating of NCDs by CARE indicates 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.

For last three fiscals its AUM increased from Rs. 1155.22 crore to Rs. 2387.27 crore and its net profit too has seen similar growth from Rs. 4.74 crore for FY 14 to Rs. 38.21 crore for FY 16.

Conclusion: Considering the rating and the coupon rate of 9.5% plus, this offer is attractive one for those who are looking for steady interest income.

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).