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InCred Financial NCD Jan.23 issue review (Avoid)

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•    This is the 2nd debt issue from IFSL since January 2022. 
•    The company posted losses till FY22 and turned the corner by H1 of FY23.
•    Considering its current financials, there is no harm in skipping this debt issue. 

InCred Financial Services Ltd. came with its maiden debt offer for Rs. 150 cr. in the month of January-February 2022. At that time, the mandate was with Sundae Capital Advisors Pvt. Ltd. jointly with InCred Capital Wealth Portfolio Managers Pvt. Ltd. Registrar of the issue were Link Intime India Pvt. Ltd. and Catalyst Trusteeship Ltd. was the debenture trustee. CRISIL assigned CRISIL A rating to the said offer. This time the debt offer is for Rs. 350 cr. and the mandate is with JM Financial Ltd. to handle it solely. 

InCred Financial Services Ltd. (IFSL) is a non-deposit-taking systemically important NBFC registered with the RBI. The company caters to lower-middle-class to middle-class Indian households for their personal finance needs like education loans, and personal loans. Correspondingly, it also offers secured and unsecured business loans to small businesses, secured loans to K12 Indian schools for their expansion plans, supply chain financing, lending to profitable financial Institutions, and microfinance companies, and escrow-backed lending through its SME vertical.

Having incorporated as Multiflow Financial Services Private Limited on February 3, 1995, as a private company and kept rechristening itself and also entered into a merger/demerger process to finally emerge as InCred Financial Services Ltd. by April 2022. As of September 30, 2022, its AUM was Rs. 5052.17 cr., catering to 330059 customers. As of the said date, it had 872 permanent employees and 53 employees on a contract basis.

IFSL is coming out with its 2nd debt issue of 3500000 Secured, Redeemable Non-Convertible Debentures of Rs. 1000 each to mobilize Rs. 350 cr. The base issue size is Rs. 175 cr. with a green shoe option to retain oversubscription to the tune of Rs. 175 cr. The issue opens for subscription on January 09, 2023, and will close on or before January 27, 2023. 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. Post allotment, NCDs will be listed on BSE and NSE. IFSL is spending Rs. 6.23 cr. for this debt issue of Rs. 350 cr. From the net proceeds, it will utilize at least 75% for onward lending, financing, and repayment/prepayment of certain borrowings with interest, and up to 25% for general corporate purposes. 

This issue is solely lead managed by JM Financial Ltd., Link Intime India Pvt. Ltd. is the registrar of the issue and Catalyst Trusteeship Ltd. is the debenture trustee. 

This debt offer has tenors of 27 months and 39 months and the frequency of interest payments is quarterly and annual. It is offering coupon rates ranging from 9.45% to 10.00%. IFSL has allocated 20% for Institutional Investors, 20% for Non-Institutional investors, 30% for HNIs, and 30% for Retail investors. 

CRISIL has assigned CRISIL A+/Stable rating for this debt issue which is valid for 180 days from the date of the assignment i.e. December 26, 2022. The rating is not a recommendation to buy, sell or hold the rated instrument and CRISIL Ratings Limited does not comment on the market price or suitability for any particular investor and investors should take their own decisions. CRISIL Ratings Limited has a practice of keeping all its ratings under surveillance and ratings are revised as and when circumstances so warrant.

On the financial performance front, for the last three fiscals, IFSL has posted a total income/net profit (loss) of Rs.  737.73 cr. / Rs. - (1255.84) cr. (FY20), Rs. 395.18 cr. / Rs. - (139.40) cr. (FY21), and Rs. 168.02 cr. / Rs. - (7.20) cr. (FY22). For H1 of FY23, it earned a net profit of Rs. 46.76 cr. on a total income of Rs. 398.12 cr. Thus it has turned the corner from the first half of the ongoing fiscal. 

As of September 30, 2022, its paid-up equity capital of Rs. 460.23 cr. was supported by free reserves of Rs. 1930.97 cr. As of the said date, its Net NPA stood at 1.12% against 1.43% as of March 31, 2022. Its debt-equity ratio of 1.5 as of September 30, 2022, will stand enhanced to 1.7 post this issue. 

Conclusion / Investment Strategy

IFSL has been posting losses till FY22. It just turned the corner in the first half of FY23. Considering its financial performance so far, there is no harm in skipping this debt offering, though it has lucrative coupon rates.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on January 5, 2023

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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their 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.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

The Incred Financial Services NCD Tranche I Jan 2023 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Incred Financial Services NCD Tranche I Jan 2023 worth investing. The Incred Financial Services NCD Tranche I Jan 2023 Note sets the NCD expectations in systematic way which tells you if Incred Financial Services NCD Tranche I Jan 2023 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Incred Financial Services NCD Tranche I Jan 2023 by providing NCD recommendations i.e. subscribe, avoid and neutral.