• 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.
PREFACE:
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.
ABOUT COMPANY:
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.
ISSUE DETAILS:
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.
ISSUE RATINGS:
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.
FINANCIAL PERFORMANCE:
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.
Review By Dilip Davda on January 5, 2023
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
