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Dhani Loans NCD April 2022 issue review (Avoid)

Dhani Loans and Services Limited Logo

•    This is the 5th debt offer from the company since February 2019. 
•    DLSL has been posting losses since FY20.
•    IVR AA/Stable rating from new agency raises eyebrows.
•    Despite its AA rating, it offers attractive coupon rates to lure investors.
•    There is no harm in skipping this tempting debt offer. 

ABOUT COMPANY:
Dhani Loans and Services Ltd. (DLSL) is an Indiabulls (now Dhani) group financial service segment arm. The Company was originally incorporated as 'Malpani Securities Private Limited', a private limited company under the provisions of the Companies Act, 1956, pursuant to a certificate of incorporation dated October 27, 1994, issued by the RoC, NCT of Delhi and Haryana. Subsequently, the name of our Company was changed to 'Shivshakti Financial Services Private Limited' pursuant to a fresh certificate of incorporation dated January 13, 2010. The name of our Company was changed to 'IVL Finance Limited' pursuant to a fresh certificate of incorporation dated October 19, 2016. Pursuant to a fresh certificate of incorporation dated September 18, 2018, the name of our Company was changed to 'Indiabulls Consumer Finance Limited'. Thereafter, the name of our Company was changed to 'Dhani Loans and Services Limited' and a fresh certificate of incorporation, consequent upon the change of name was issued by the RoC on July 7, 2020. 

DLSL is a non-deposit taking systemically important NBFC registered with RBI and a 100% subsidiary of Dhani Services Ltd. It provides transaction finance to customers through an array of products offered on the Dhani App and also provides personal loans, and secured and unsecured business loans to individuals and corporates. 

As of December 31, 2021, it had approximately 2.42 million subscribers to the Dhani OneFreedom Card in over 700 cities and towns across India. As of the said date, the Company has disbursed loans to customers in over 700 cities in India through the Dhani App, enabling it to operate on a Pan-India basis. Further, DLSL has over 5,176 employees as of December 31, 2021.

ISSUE DETAILS:
This is the 5th debt offer from the company since February 2019, the first three were as Indiabulls Consumer Finance Ltd. and the remaining as Dhani Loans. This offer is for a base size of Rs. 100 cr. with a green-shoe option to retain oversubscription to the tune of Rs. 100 cr. and thus the overall size of the issue will be Rs. 200 cr. The company is issuing Secured Redeemable Non-Convertible Debentures (NCDs) of Rs. 1000 each. The issue opens for subscription on April 19, 2022, and will close on or before May 10, 2022. 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. Post allotment, NCDs will be listed on BSE and NSE. DLSL will spend Rs. 5.50 cr. for this debt offering. From the residual portion, it will utilize at least 75% towards onward lending, financing, repayment of certain borrowings and up to 25% for general corporate purposes. 

DLSL is offering coupon rates ranging from 10.00% to 11.00% and has a tenor of 370 days, 24 months, and 36 months. The frequency of interest payments will be Cumulative, Monthly and Annual as per the choice of series by investors. 

This offer is rated IVR AA/Stable by Infomerics Valuation and Rating Pvt. Ltd. Instruments with this rating are considered to offer a high degree of safety regarding timely servicing of financial obligations and carry very low credit risk. However, such a rating from a new rating agency for a loss-making company raises eyebrows. 

The issue is jointly lead managed by Edelweiss Financial Services Ltd. and Trust Investment Advisors Pvt. Ltd. while KFin Technologies Ltd. (erstwhile known as KFin Technologies Pvt. Ltd.) is the registrar and Beacon Trusteeship Ltd. is the debenture trustee. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, DLSL has (on a consolidated basis) posted a total income/profit (loss) of Rs. 1775.23 cr. / Rs. 384.52 cr. (FY19), Rs. 2683.69 cr. / Rs. - (30.00) cr. (FY20) and Rs. 1176.69 cr. / Rs. - (113.95) cr. (FY21). Its net NPA for these periods jumped from 0.25% to 2.28%.  For the first nine months of FY22 ended on December 31, 2021, it has posted a loss of Rs. - (247.53) cr. on a total income of Rs. 777.28 cr. Thus since FY20, it has been incurring losses. For this period end, its net NPA stood at 1.81%. Its current debt-equity ratio of 0.43 will stand enhanced to 0.47 post this issue. 


Conclusion / Investment Strategy

Though this debt offer is offering very tempting coupon rates and has an AA/Stable rating from a new rating agency, its loss-making status since FY20 raises major concern. There is no harm in skipping this lucrative debt offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Apr 14, 2022

Review 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 before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The 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 news papers.

Email: dilip_davda@rediffmail.com

The Dhani Loans and Services NCD April 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Dhani Loans and Services NCD April 2022 worth investing. The Dhani Loans and Services NCD April 2022 Note sets the NCD expectations in systematic way which tells you if Dhani Loans and Services NCD April 2022 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Dhani Loans and Services NCD April 2022 by providing NCD recommendations i.e. subscribe, avoid and neutral.


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