IIFL Home Fin NCD Dec. 24- Tranche I issue review - (Apply)

•    The company is a technology driven housing finance company offering its services to first time home buyers in EWS and LIG segments.
•    The company posted steady growth in its top and bottom lines for the reported periods. 
•    It has strong financial fundamentals, and the debt offer is rated CRISIL AA/Stable and IND AA/Stable.
•    The allotment will be made on "First Come - First Served" Basis.
•    Investors looking for steady income may park funds for medium to long term.

ABOUT COMPANY:
IIFL Home Finance Ltd. (IHFL) is a technology driven retail focused housing finance company with the primary focus on providing loans to first time home buyers in the economically weaker sections ("EWS") and low-income group ("LIG") group. It provides loans to customer in the suburbs of Tier 1 cities and Tier 2 cities and to customers residing in Tier 3 and Tier 4 cities in India where the collateral is the existing or self-occupied residential property. The company serves salaried and self-employed customers which account for 53.18% and 46.82% of its AUM as at September 30, 2024, respectively. 

IHFL served over 4,27,048 customers as at September 30, 2024. It offers customers a range of mortgage-related loan products, including (i) housing loans, for purchase of ready built residential units, under construction property by approved builders, self-construction, home improvement on pre-owned property and purchase of land for construction of residential property; (ii) secured business loans, for primarily meeting working capital requirement, business use and purchase of commercial property; and (iii) affordable housing project loans, to meet construction expenses of affordable housing projects of reputed developers. Housing loans, secured business loans and affordable housing project loans contribute 77.30%, 20.42% and 2.28% of AUM, as at March 31, 2024, respectively and 78.48%,19.40% and 2.12% of AUM, as at September 30, 2024, respectively. As on September 30, 2024, the housing loan and secured business loans have an average loan-to-value of 71.30% and 47.05%, respectively, at the time of sanctioning of the loans. 

The average ticket size of housing loans, secured business loans and affordable housing project loans was Rs. 0.16 crores, Rs. 0.10 crores and Rs.7.02 crores, respectively, as at September 30, 2024. Its AUM has grown at a CAGR of 22.60% from Rs. 23,617.37 crores as at March 31, 2022 to Rs. 35,498.55 crores, as at March 31, 2024. As on September 30, 2024, AUM stood at Rs. 37,098.39 crores. As at March 31, 2024 and September 30, 2024, its Gross NPA expressed as a percentage of our AUM was 1.32% and 1.45%, respectively, and Net NPA expressed as a percentage of AUM was 1.02% and 1.12%, respectively. In the Fiscal 2024, 2023 and 2022 our Company originated 98.45%, 98.50% and 99.06% of the housing loans digitally.

It had a widespread network of 387 branches in 18 states and 2 union territory as at September 30, 2024, and total number of employees were 5434. Its focus states include Delhi NCR, Gujarat, Andhra Pradesh, Telangana, Madhya Pradesh, Karnataka, Rajasthan, Maharashtra and Tamil Nadu. As a technology driven housing finance Company, it endeavors to make customer experience as seamless as possible. Its approach has always been digital first and has made the entire life cycle of housing loans i.e., from origination to closure, completely digitized. It has also adopted technology in all other business processes including customer service, collections, underwriting and monitoring asset quality.

ISSUE DETAILS:
This is the 3rd debt offer from the company since July 2021. Last debt offer was in December 2021. Now the company is coming out with its debt offer of Secured, Redeemable, NCD of Rs. 1000 each to mobilize Rs. 500 cr., it consists of base issue worth Rs. 100 cr. and a green shoe option of Rs. 400 cr. It has a shelf limit of Rs. 3000 cr. The offer opens for subscription on December 06, 2024, and will close on or before December 19, 2024. Post allotment, NCDs will be listed on BSE and NSE. 

The company has allocated 20% for Institutional Investors, 20% for Non-Institutional Investors, 30% for HNIs and 30% for Retail investors.

The company is spending Rs. 11.35 cr. for this Tranche-I offer and from the net proceeds, it will utilize at least 75% for the purpose of onward lending/financing/refinancing the existing indebtedness of the company and /or payment or repayment of certain existing borrowings, and maximum up to 25% for general corporate purposes. 

This debt offer is jointly lead managed by Trust Investment Advisors Pvt. Ltd., and IIFL Securities, while Link Intime India Pvt. Ltd. is the registrar to the issue and Catalyst Trusteeship Ltd. is the Debenture Trustee. 

The 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. This Debt offer is carrying a coupon rates ranging from 8.85% to 9.25% with interest payment mode of Annual, Monthly or Cumulative. The tenors of the debt offer are 24 months, 36 months, 60 months and 84 months as per the the investors.

The Company may, at its sole discretion, from time to time, consider, subject to applicable statutory and/or regulatory requirements, buyback of NCDs, upon such terms and conditions as may be decided by it. The allotment will be done on the basis of "First come - First Served" basis.

ISSUE RATING:
This debt offer is rated CRISIL AA/Stable by CRISIL Ratings Ltd., and IND AA/Stable by India Ratings & Research Pvt. Ltd.  Securities with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such securities carry very low credit risk. Ratings given by CRISIL and India Ratings are valid as on the date of this Tranche I Prospectus and shall remain valid on date of issue and allotment of NCDs and the listing of the NCDs on Stock Exchange unless withdrawn. In case of any change in credit ratings till the listing of NCDs, the Company will inform the investors through public notices/advertisements in all those newspapers or electronic modes such as online newspapers or website of the issuer or the stock exchange in which pre issue advertisement has been given. 

The rating is not a recommendation to buy, sell or hold the rated instrument and investors should take their own decisions. The rating may be subject to revision or withdrawal at any time by the assigning rating agency and each rating should be evaluated independently of any other rating. The rating agencies have a right to suspend or withdraw the rating at any time on the basis of factors such as new information. There are no unaccepted ratings and any other ratings other than as specified in this Tranche I Prospectus.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 2228.93 cr. / Rs. 593.44 cr. (FY22), Rs. 2709.32 cr. / 768.12 cr. (FY23), Rs.3316.76 cr. / Rs. 1016.55 cr. (FY24). For H1 of FY25 ended on September 30, 2024 (as per unaudited results), the company earned a net profit of Rs. 553.41 cr. on a total income of Rs. 1883.30 cr. The company posted growth in its top and bottom lines for the reported periods. However, the financial statements attached to the offer documents are blurred. 

As of September 30, 2024, its net NPA stood at 1.12% against 1.02% as of March 31, 2024. As of September 30, 2024, its equity capital of Rs. 26.34 cr. was supported by free reserves of Rs. 7026.07 cr., and total borrowings were Rs. 16867.54 cr.  Its debt equity ratio of 2.39 as of September 30, 2024 will stand enhanced to 2.82 post this issue.