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IIFL Home Tranche-I NCD issue review (May apply)

IIFL Home Finance Ltd Logo
  • This is the maiden offer from IIFL Home, an IIFL group company.
  • Except for a minor setback for FY20, it has fared well.
  • The offer is rated CRISIL/AA stable and BWR/AA+ stable.
  • This offer has only long tenure unsecured instrument.


IIFL Home Finance Ltd. (IHFL) is a part of IIFL group and is a retail focused housing finance company with main focus on providing loans to first time home buyers in the EWS and LIG segment in the suburbs of Tier 1 cities, Tier 2 cities and Tier 3 cities in India where the collateral is a proposed self-occupied residential property. The company serves salaried and self-employed customers who account for 44.37% and 55.63% of its AUM as of March 31, 2021, respectively. IHFL has served over 141,000 customers as of March 31, 2021.

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 69.78%, 26.00% and 4.22% of its AUM, as of March 31, 2021, respectively.

IHFL's AUM has increased from Rs. 9769.32 cr. as of March 31, 2017 to Rs. 20693.69 cr. as of March 31, 2021, at a CAGR of 20.64%. Its cost to Income Ratio has decreased from 49.64% for Fiscal 2017 to 22.32% for Fiscal 2021. As of March 31, 2021, its Gross NPA expressed as a percentage of AUM was 1.72% and Net NPA expressed as a percentage of AUM was 1.20%.

The company has a widespread network of 125 branches in 16 states and one union territory as of March 31, 2021. Most of its branches are located in the suburbs of Tier 1 cities, Tier 2 cities and Tier 3 cities which offer significant opportunities in affordable housing segment that is relatively untapped by bigger players in the home loan market. IHFL's focus states include Gujarat, Andhra Pradesh, Telangana, Madhya Pradesh, Karnataka, Rajasthan, Maharashtra and Punjab.


The company is coming out with its maiden debt offer under Tranche-I with a base size of Rs. 100 cr. with an option to retain oversubscription to the tune of Rs. 900 cr. making the overall issue size of Rs. 1000 cr. The company will be issuing Unsecured subordinated redeemable non-convertible debentures of the face value of Rs. 1000 each. The issue opens for subscription on July 06, 2021 and will close on or before July 28, 2021. Post allotment, NCDs will be listed on BSE and NSE. IHFL has an in-all shelf limit of Rs. 5000 cr. for this offer. The company will be spending around Rs. 31 cr. for mobilizing Rs. 1000 cr.

Minimum application is to be made for 10 NCDs (i.e. Rs. 10000.00) and in multiple of 1 NCD (i.e. Rs. 1000.00) thereon, thereafter. IHFL has allocated 10% for Institutions, 10% for Non-institutions, 40% for HNIs and 40% for retail investors.

The issue is jointly lead managed by Edelweiss Financial Services Ltd., IIFL Securities Ltd., ICICI Securities Ltd., Trust Investment Advisors Pvt. Ltd., Equirus Capital Pvt. Ltd., Catalysts

Trusteeship Ltd. is the debenture trustee while Link Intime India Pvt. Ltd. is the registrar to the issue.

These NCDs are rated as CRISIL/AA Stable by CRISIL Ratings Ltd. and BWR/ AA+/Stable by Brick Work Ratings 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.

This NCD carries coupon rates ranging from 9.60% to 10.50% p.a., and having interest payment mode of Monthly, Annually or Cumulative as per the preference of investors. The only tenure for these NCDs will be 87 months. Thus it's a long term investment debt offer for Unsecured instruments.

IHFL will use up to 75% of the net proceeds for onward lending, financing and for repayment/prepayment of principal and interest of existing borrowings and 25% for general corporate purposes.



On the financial performance front, for the last three fiscals, IHFL has posted total income/net profit of Rs. 1846.11 cr. / Rs. 306.39 cr. (FY19), Rs. 1803.02 cr. / Rs. 244.92 cr. (FY20) and Rs. 2067.75 cr. / Rs. 401.10. Cr. (FY21). It suffered a minor setback for FY20.

IHFL's current debt equity ratio of 6.06 (as of March 31, 2021) will stand enhanced to 8.39 post this entire issue of Rs. 5k cr.

Conclusion / Investment Strategy

Group parentage is sound, good 'Stable' rating by CRISIL and BWR also augurs well. The only major concern is the unsecured type of debt instrument that raises concern. It offers lucrative coupon rates with long term tenure. Cash surplus/risk savvy investors may consider parking their fund at their own risks.

Review By Dilip Davda on July 4, 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.


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