Indel Money NCD Tranche II - May 22 review (Neutral)

Indel Money Limited Logo

•    This is the 2nd debt offer from the company since September 2021.
•    This time the rating agency is changed by the company. 
•    Though coupon rates are lucrative, poor rating makes it a bit risky offer.
•    Risk seekers/cash surplus investors may park their funds, others may ignore. 

Indel Money Ltd. (IML), the Indel group company is a non-deposit taking and a non - systemically important non-banking finance company ("NBFC") in the gold loan sector lending money against the pledge of household gold jewellery ("Gold Loans") in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh and Telangana and the union territory of Puducherry. It also provides loans against property, business loans and personal loans. 

IML is one of the few gold loan companies which has launched a long term 2-year gold loan scheme to support the cash and liquidity requirements of customers. The 2-year gold loan schemes account for 13.34% of the gold loan portfolio of the Company for Fiscal 2022.

For the Fiscal ended on March 31, 2022, March 31, 2021, and March 31, 2020, its total outstanding AUM was Rs. 525.06 cr., Rs. 398.84 cr. and Rs. 336.29 cr. out of which the outstanding gold loans AUM amounted to Rs. 422.75 cr., Rs. 309.97 cr. and Rs. 295.89 cr. which is 80.51%, 77.72% and 87.99% of total loans and advances on such specific dates. IML provides customers with tailor-made gold loan products with varying rates of interest, loan amount and tenure to suit their varied requirements.

As of March 31, 2022, it had a network of 205 branches spread in the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Odisha and Telangana and the union territory of Puducherry and a headcount of 868.

The company claims to be the first to introduce Doorstep Gold Loan and the digital process for speedy distribution and recovery process for its business. The company has planned to expand its branch network to 425 with a commensurate increase in headcounts by 2025. 

The company is coming out with its 2nd debt offer of Secured redeemable non-convertible debentures (NCDs) having a face value of Rs. 1000 each. The company will have a base issue size of Rs. 50 cr. and with a greenshoe option of Rs. 50 cr., the overall size of the offer will be Rs. 100 cr. The issue opens for subscription on May 27, 2022, and will close on or before June 22, 2022. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiples of 1 NCD (i.e. Rs. 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE. The company will be spending Rs. 2.10 cr. for this entire debt offer of Rs. 100 cr. 

From the net proceeds, the company will utilize up to 75% for onward lending, financing, repayment/prepayment of certain borrowings with interest and up to 25% for general corporate purposes. 

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd., Vistra ITCL (India) Ltd. is the debenture trustee and Link Intime India Pvt. Ltd. is the registrar to the issue. 

This issue has tenures of 366 days, 18 months, 24 months, 61 months and 77 months for secured NCDs The company is offering interest rates ranging from 9.00% to 11%. The interest payments have monthly and cumulative modes as per the options selected by the investors. IML has lowered the interest rate at the lower end amidst interest rate rising trends and raises concern.

IML has changed the rating agency for this debt offering. This debt offering is rated Acuite BBB+/Stable by Acuite Ratings & Research Ltd. The instruments with this rating are considered to have a moderate degree of safety and moderate credit risk. The rating given by Acuite Ratings & Research Limited is valid as of the date of this Prospectus and shall remain valid on the date of the issue and allotment of NCDs and the listing of the NCDs on BSE. The ratings provided by Acuite Ratings & Research Limited may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. These ratings are not a recommendation to buy, sell or hold securities and investors should make their own decisions.

On the financial performance front, on a consolidated basis, for the last three fiscals, IML has reported a total income/net profit of Rs. 42.88 cr. / Rs. 1.57 cr. for FY19, Rs. 63.07 cr. / Rs. 2.19 cr. for FY20 and Rs. 94.49 cr. / Rs. 9.49 cr. for FY21. The sudden boost in the bottom line for FY 21 i.e. pre-debt issue year raises eyebrows. As of March 31, 2021, its paid-up equity capital of Rs. 82.15 cr. is supported by free reserves of Rs. 5.48 cr. For the nine months period of FY22 ended on December 31, 2021, it earned a net profit of Rs. 5.11 cr. on a total income of Rs. 90.42 cr. Till FY20 it had negative other equity. 

Gross non-performing loan assets were 1.33%, 0.46%, 0.36% and 1.61% of its loan portfolio under management for nine months ended December 31, 2021, and the Fiscals 2021, 2020 and 2019, respectively, and debt-equity ratio (on a consolidated basis) was 5.79 that will stand enhanced to 6.84 post this issue.

Conclusion / Investment Strategy

Though this debt offer has lucrative coupon rates, the average rating from a changed rating agency raises concern. Cash surplus/risk seekers and well-informed investors may consider this offer, others can ignore it.

Review By Dilip Davda on May 25, 2022

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: dilip_davda@rediffmail.com ).

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