ICL Fincorp Jan 25 NCD Issue review - (Avoid)

•    IFL is primarily is a gold loan company with major operations in southern states.
•    This is the 4th debt offer from the company since November 2023.
•    The last debt offer was in November 2024.
•    It has surprised with dismal performance for FY24. 
•    It is offering a lucrative coupon rates, but has a poor BBB-/Stable rating from CRISIL.
•    The company has allocated 64% of the issue for the retail investors.
•    There is no harm in skipping this poorly rated debt offer despite lucrative coupon rates.

ABOUT COMPANY:
ICL Fincorp Ltd. (IFL) is a non-deposit taking and a systemically important non-banking finance company (“NBFC”) in the gold loan sector lending money against the pledge of household gold jewellery (“Gold Loans”) in the states of Kerala, Tamil Nadu, Andhra Pradesh, Karnataka, Telangana, Odisha, Gujarat and Maharashtra. It also provides loans against property, business loans and personal loans. 

As of November 30, 2024, it had a network of 294 branches, out of which majority of the branches are located in the southern states of India i.e., Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana, Odisha and in the western states of India i.e., Gujarat and Maharashtra.

The Company specializes in providing Gold Loans to individuals, primarily from middle-class families. Its Gold Loan business is built on the foundation of customer-centricity, efficiency, and with commitment to deliver seamless financial services. It is emphasizing focus on customer onboarding, loan disbursal, and the creation of an efficient ground management team. IFL has invested in technology and processes that enable quick and easy customer onboarding. This includes user-friendly digital interfaces and simplified documentation procedures, ensuring that customers can access its services with minimal effort. Its approach involves assessing the specific needs of customers and tailoring loan solutions accordingly.

The company offers special schemes with shorter tenures for customers who require quick financing with the intent to repay within a limited period. Customers with long term financial objectives can opt for schemes that provide extended repayment tenures. It has specific schemes that offer higher LTV ratios, allowing customers to avail higher loan amounts. The company offers customers a range of property loans, business loans, new and pre-owned vehicle loans (“Other Loans”) along with gold loans. As of November 30, 2024, it had 1269 employees, with 59 % of women employees.

ISSUE DETAILS:
The company is coming out with its 4th debt offer. The company is offering 1000000 Secured, Redeemable, Non-Convertible Debentures having a face value of Rs. 1000 each. The base size of the issue is Rs. 50 cr., and the company has green shoe option to retain oversubscription to the tune of Rs. 50 cr., thus making the overall size of the debt offer to Rs. 100 cr. The issue opens for subscription on January 08, 2025, and will close on or before January 21, 2025. Post allotment, NCDs will be listed on BSE. 

IFL is spending Rs. 2.57 cr. for this NCD issue and from the net proceeds, it will utilize at least 75% for onward lending, financing and for repayment of certain borrowings, and maximum up to 25% for general corporate purposes. 

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd., while Cameo Corporate Services. Ltd. is the registrar of the issue.  Mitcon Credentia Trusteeship Services Ltd., is the Debenture Trustee for the issue. There is a change in lead manager for this debt offer.

The minimum application to be made is for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. The interest payment frequency will be Monthly, Cumulative, or Annual as per the selection of the series by the investors. It is offering a coupon rate ranging from 11.00% to 12.50%, and has a tenors of 13 months, 24 months, 36 months, 60 months, and 68 months. The company has allocated 5% for Institutional Investors, 1% for Non-Institutional Investors, 30% for HNIs and 64% for Retail investors. 

CREDIT RATING:
The issue is rated as CRISIL BBB-/Stable by CRISIL Ratings and Research Ltd. The rating given by CRISIL is valid as on the date of this Prospectus and shall remain valid on date of the issue and allotment of NCDs and the listing of the NCDs on BSE. The ratings provided by CRISIL may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities and Investors should take their own decisions.

The rating of the NCDs by CRISIL indicates that the instruments with this rating are considered to have moderate degree of safety and moderate credit risk. 

FINANCIAL PERFORMANCE:
On the financial performance front, IFL has (on a consolidated basis) posted a total income/net profit of Rs. 76.35 cr. / Rs. 2.80 cr. (FY21), Rs. 89.43 cr. / Rs. 2.71 cr. (FY22), Rs. 112.64 cr. / Rs. 3.04 cr. (FY23), and Rs. 145.69 cr. / Rs. 0.08 cr. (FY24).  For H1 of FY25 ended on September 30, 2024, it (on a standalone basis) earned a net profit of Rs. 3.70 cr. on a total income of Rs. 90.66 cr. After a severe setback for FY24, sudden boost in bottom line for H1-FY25 raise eyebrows.

Its debt equity ratio of 5.57 as of September 30, 2024, will stand enhanced to 6.61 post this NCD issue (on a consolidated basis).