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Indiabulls Housing Fin NCD March/April 22 review (May apply)

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•    This is the fourth debt offer from IBHFL since September 2016.
•    It has kept coupon rates unchanged with the same ratings.
•    Declining top and bottom lines remain and rising NPAs are the concerns. 
•    Well informed Investors may consider it for long term investment. 

Indiabulls Housing Finance Ltd. (IBHFL) is one of the largest housing finance companies ("HFCs") in India in terms of AUM. It is a non-deposit taking HFC registered with the NHB and also a notified financial institution under the SARFAESI Act. IBHFL focuses primarily on long-term secured mortgage-backed loans and as of the date of this Shelf Prospectus, the majority of its loan book comprises secured loans. The company primarily offers housing loans and loans against property to the target client base of salaried and self-employed individuals and micro, small and medium-sized enterprises ("MSMEs").

It also offers mortgage loans to real estate developers in India in the form of lease rental discounting for commercial premises and construction finance for the construction of residential premises. A majority of its assets under management ("AUM") comprise housing loans, including in the affordable housing segment, as defined by the RBI. The company has shifted to an asset-light business model, focusing on co-lending of loans along with banks, other financial institutions and credit funds and an increased sell-down of its loan portfolio.

Its offices include head office, master service centres, branch offices and service centres. As of December 31, 2021, the company had a network of 141 offices spread across 95 cities which gives it a Pan-India presence and allows it to interact with and service customers. As of December 31, 2021, IBHFL had a direct sales team of over 1,659 employees who were located across the network. This sales team is instrumental in sourcing the majority of customers. It also relies on external channels, such as direct sales agents for referring potential customers. In addition, it has an online home loans fulfilment platform called e-Home Loans which allows customers to apply for a home loan and upload the requisite documents online.

As of December 31, 2021, IBHFL's consolidated borrowings (other than debt securities) were Rs. 31,168.60 crores, consolidated debt securities were Rs. 25,531.47 crores and consolidated subordinated liabilities were Rs. 4,693.06 crores. It relies on long-term and medium-term borrowings from banks and other financial institutions, including external commercial borrowings and issuances of non-convertible debentures. The company has a diversified lender base, comprising public sector undertakings ("PSUs"), private banks and other financial institutions. It also sells down parts of the portfolio through the securitisation and/or direct assignment of loan receivables to various banks and other financial institutions, which is a major source of liquidity.

IBHFL is coming out with its fourth debt offer in a short span after September 2016. Its last offer was in the month of December 2021. The company is coming out with its offer of Secured, Redeemable Non-Convertible Debentures of the face value of Rs. 1000 each together amounting to Rs. 100 cr. as the base size and it has a greenshoe option to retain oversubscription to the tune of Rs. 900 cr., thus making an overall issue size of Rs. 1000 cr. under Tranche I, (It has a shelf limit of Rs. 1400 cr.). 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. The issue opens for subscription on March 30, 2022, and will close on or before April 22, 2022. Post allotment, NCDs will be listed on BSE and NSE. 

The company will utilize up to 75% of the net proceeds for the purpose of onward lending, financing, and repayment of interest and principal of existing borrowings and up to 25% for general corporate purposes. The company will be spending Rs. 22.50 cr. for this entire debt offer.

This debt issue is jointly lead managed by Edelweiss Financial Services Ltd., A K Capital Markets Ltd., IIFL Securities Ltd., and Trust Investment Advisors Pvt. Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue and IDBI Trusteeship Services Ltd. is the Debenture Trustee.

This debt offering is rated as CRISIL AA/Stable by CRISIL and BWR AA+/Negative by Brickworks Rating India Pvt. Ltd. The rating of NCDs by Brickworks indicate that instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk.

This debt offer has coupon rates ranging from 8.05 % to 9.25 %. It has tenures of 24 months, 36 months and 60 months. Series have Annual, Monthly or Cumulative interest payment options. IBHFL is offering an additional 0.25% incentive to existing bondholders of group companies and shareholders of IBHFL. It has allocated 30% for Institutional investors, 10% for non-Institutional investors, 30% for HNIs and 30% for retail investors. Allotment will be compulsorily in Demat mode only and on the basis of "First come, first served".

For the Fiscal Years 2021, 2020 and 2019, its consolidated total revenue from operations was Rs. 4,553.49 crores, Rs. 9,927.42 crores, Rs. 13,216.44 crores and Rs. 17,019.62 crores, respectively. For the nine months ended December 31, 2021, the company's consolidated profit for the period was Rs. 871.00 crores and for the Fiscal Years 2021, 2020 and 2019, the consolidated net profit for the period attributable to shareholders of the Company was, Rs. 1,201.59 crores, Rs. 2,199.80 crores and Rs. 4,090.53 crores, respectively.

As of December 31, 2021, and March 31, 2021, 2020 and 2019, its consolidated gross NPAs as a percentage of consolidated AUM were 3.18%, 2.66%, 1.84% and 0.88%, respectively, and consolidated net NPAs (which reflect its gross NPAs fewer provisions for ECL on NPAs (Stage 3) for the six months ended December 31, 2021, and the years ended March 31, 2021, 2020 and 2019, as a percentage of consolidated AUM, were 1.80%, 1.59%, 1.24% and 0.69%, respectively. 

While its net profits are showing declining trends, its NPAs are rising and remains a major concern.

Conclusion / Investment Strategy

This is the fourth offer from this company since September 2016 and it has maintained its coupon rates for the last two offers. Considering the poor financial performance and rising NPAs, it may find a lukewarm response. Well informed investors may consider parking of funds in this debt offering.

Review By Dilip Davda on March 26, 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: ).

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