IIFL Finance (March 21) Tranche I NCD Issue review (Others)

  • The company is registered with RBI as a NBFC-NDSI.
  • It has posted inconsistency in its top and bottom lines for last three fiscals.
  • The coupon rates are high due to unsecured instruments.
  • This instrument carries CRISIL AA/Negative and BWR AA+/Negative ratings.
  • Considering rating, issue appears attractive in falling interest rates scenario.

ABOUT COMPANY

IIFL Finance Ltd. (IIFLFL) formerly known as IIFL Holdings Ltd. is a Systemically Important Non-deposit taking Non-Banking Financial Company ("NBFC-NDSI") registered with the RBI, catering to the credit requirements of a diverse customer base with its plethora of products. Its offerings include home loans, gold loans, business loans including loans against property and medium and small enterprise financing, micro finance, construction and real estate finance and capital market finance; catering to both retail and corporate clients.

Over the past several years, the group has diversified its products and expanded its presence into segments that are of a greater relevance to the evolving business environment and customer demand trends.

As of March 31, 2019, it completed the sale of commercial vehicles' financing business as a going concern, in order to focus on scaling up existing business segments of Affordable Home Loans, Gold Loans, Business Loans and Microfinance. IIFLFL's key strategy is to steadily grow high quality, diversified retail assets focusing on under-banked segments, with effective risk management and cost optimization through well-defined processes and leveraging technology.

As of December 31, 2020, the networks of IIFLFL were - 2439 branches and 18083 employees.

ISSUE DETAILS

To part finance its plans for onward lending, financing, refinancing the existing indebtedness of the Company (payment of interest and/or repayment/prepayment of principal of borrowings (75% of the net proceeds) and general corpus fund needs (25% of the net proceeds), IIFLFL is coming out with an Unsecured Subordinated Redeemable Non-Convertible Debentures having face value of Rs. 1000 each under Tranche I. Base size of the issue is Rs. 100 crores and the company has green shoe option to retail additional subscription of Rs. 900 crores making the total issue size of Rs. 1000 crores. IIFLFL has a shelf limit of Rs. 5000 crores worth NCD issues overall. The company will be spending Rs. 30.93 cr. for the Tranche I issue process.

This issue has fixed tenor of 87 months with Monthly, Annually or Cumulative interest payment mode for all categories. The coupon rates are ranging from 9.60% to 10.00% p.a. There is no PUT and CALL options for this issue.

The issue opens for subscription on March 03, 2021 and will close on or before March 23, 2021. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. Application must be under ASBA only and allotment will be done in demat mode.

The issue is jointly lead managed by Edelweiss Financial Services Ltd., IIFL Securities Ltd. and Equirus Capital Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Catalyst Trusteeship Ltd. is the Debenture Trustee. Post allotment, NCDs will be listed on BSE and NSE.

This issue is rated "CRISILAA/Negative" by CRISIL Ltd. and BWR AA+/Negative by Brickworks Rating India Pvt. Ltd. The aforesaid rating indicates that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.

IIFL Finance NCD - Teams of Each Series of NCDs

  Series 1 Series 2 Series 3
Frequency of Interest Payment Annual Monthly At Maturity
Nature Unsecured Unsecured Unsecured
Tenor 87 months 87 months 87 months
Coupon Rate 10% 9.60% NA
Effective Yield (% per Annum) 10% 10.03% 10.03%
Amount on Maturity Rs 1000 Rs 1,000 Rs 2,000

In terms of asset quality metrics, overall gross non-performing assets (GNPAs) of IIFL Finance (on a consolidated basis) increased to 2.31% as on March 31, 2020 from 1.96% as on March 31, 2019 and Net NPAs increased to 0.97% from 0.63% for the said periods.

FINANCIAL PERFORMANCE

For the last three fiscals, IIFLFL has posted (on a consolidated basis) total income/net profits of Rs. 3812.62 cr. / Rs. 911.32 cr. (FY18), Rs. 4977.80 cr. / Rs. 784.60 cr. (FY19) and Rs. 4738.92 cr. / Rs. 495.18 cr. (FY20). For the first nine months of the current fiscal ended on December 31, 2020, it earned net profit of Rs. 466.17 cr. on total income of Rs. 4241.13 cr.

As at December 31, 2020, March 31, 2020, March 31, 2019 and March 31, 2018, its consolidated assets under management were Rs. 42264 cr., Rs. 37951 cr., Rs. 34903 cr. and Rs. 31134 cr., respectively. For the said periods, it's Net NPAs stood at 0.77%, 0.97%, 0.63% and 0.79% respectively.

Post this issue, its debt equity ratio would stand enhanced from 5.66 (as on December 31, 2020) to 5.83.


Conclusion / Investment Strategy

Though this debt instrument has AA/Negative rating with higher coupon rates, its unsecured status may raise concern. However, investors looking for attractive regular returns in the falling interest rates scenario, they may consider investment at their own risks.

Review By Dilip Davda on Mar 2, 2021

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 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. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. 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 news papers.

Email: dilip_davda@rediffmail.com

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


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