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Indiabulls Hsg Fin NCD Dec 22 (Tranche IV) issue review (May apply)

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•    This is the 7th debt offer from IBHFL since September 2016.
•    Its last debt offer was in the month of October 2022.
•    This offer is with a bit higher coupon rates with maintained ratings. 
•    Well informed/cash surplus 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 the co-lending of loans along with banks, other financial institutions, and credit funds and an increased sell-down of its loan portfolio.

As of March 31, 2022, on a consolidated basis, IBHFL's Loan Book was Rs. 61,589.26 crores and as of September 30, 2022, the Loan Book was Rs. 56,896.87 crores. It has now 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 loan portfolio. 

As of September 30, 2022, it has a network of 164 branches spread across India which gives it a Pan-India presence and allows it to interact with and service customers. As of September 30, 2022, the company has a direct sales team of 2,200 employees who were located across its 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 loan fulfilment platform called e-Home Loans which allows customers to apply for a home loan and upload the requisite documents online.

As of September 30, 2022, IBHFL's consolidated borrowings (other than debt securities) were Rs. 30,264.10 crores, consolidated debt securities were Rs. 20,119.23 crores and consolidated subordinated liabilities were Rs. 4,616.50 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 securitization and/or direct assignment of loan receivables to various banks and other financial institutions, which is a major source of liquidity for the company.

IBHFL is coming out with its 7th debt offer in a short span. Its last offer was in the month of October 2022. 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 green shoe option to retain oversubscription to the tune of Rs. 900 cr., thus making an overall issue size of Rs. 1000 cr. under Tranche IV, (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 December 01, 2022, and will close on or before December 22, 2022. Post allotment, NCDs will be listed on BSE and NSE. 

The company will utilize at least 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 Rs. 1000 cr. 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 ICRA AA/Stable by ICRA Ltd. The rating of NCDs by Brickworks indicates that instruments with this rating are considered to have a high degree of safety regarding the timely servicing of financial obligations and such instruments carry low credit risk.

This debt offer has coupon rates ranging from 8.90 % to 9.80 %. 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 last three Fiscal Years, its consolidated total revenue/net profits from operations were Rs. 13223.23 cr. / Rs. 2165.92 cr. (FY20), Rs. 10030.12 cr. / Rs. 1201.59 cr.  (FY21) and Rs. 8993.90 cr. / Rs. 1177.74 cr. (FY22). Thus its top and bottom lines marked declining trends. For H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 576.12 cr. on total revenue of Rs. 4309.05.

As of September 30, 2022, March 31, 2022, 2021, and 2020, its consolidated gross NPAs as a percentage of consolidated Loan Book were 3.73%, 3.76%, 3.16%, and 2.32%, respectively, and consolidated net NPAs for the six months ended September 30, 2022, and years ended March 31, 2022, 2021 and 2020, as a percentage of consolidated Loan Book, was 2.16%, 2.21%, 1.90%, and 1.56%, respectively. As of September 30, 2022, it has ECL allowance on financial assets and loan commitments amounting to Rs. 1,774.75 crores on a consolidated basis which is equivalent to 3.12% of consolidated Loan Book and 83.59% of consolidated Gross NPAs. The ECL allowance also includes provisions for increased risk of deterioration of its loan portfolio on account of macroeconomic factors caused by the COVID-19 pandemic.

Its debt-equity ratio of 3.25 as of September 30, 2022, will increase to 3.31 post this debt issue. As of the same date, its existing paid-up capital of Rs. 89.72 cr. is supported by free reserves worth Rs. 16837.79 cr. 

Conclusion / Investment Strategy

This is the 7th debt offer from this company since September 2016. For this debt offering, the company has hiked its coupon rates a bit while maintaining its rating. Well-informed cash surplus investors may park their funds for a steady income.

Review By Dilip Davda on November 29, 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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