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Indiabulls Housing Finance NCD Tranche I -Sept. 21 issue review (May apply)

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• IBHFL is coming out with a debt offer after a gap of five years.
• This time, the rating has downgraded a notch compared to the previous offer.
• IBHFL's dividend outgo has been declining over the years for the last three fiscals.
• Offer has lucrative coupon rates with AA ratings.
• Investors looking for steady income may consider parking of funds.


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. As of March 31, 2021, housing loans and non-housing loans constituted 65% and 35%, respectively of consolidated AUM. The company 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 its loan portfolio.

IBHFL's offices include head office, master service centres, branch offices and service centres. Its network of 135 offices spread across 92 cities gives it a Pan-India presence and allows it to interact with and service customers. As of June 30, 2021, it had a direct sales team of over 1,363 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, the company 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 June 30, 2021, IBHFL's consolidated borrowings (other than debt securities) were Rs 33,454.18 crores, consolidated debt securities were ₹27,522.67 crores and consolidated subordinated liabilities were ₹4,680.90 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. It currently has no reliance on commercial papers. 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 it.


IBHFL is coming out with its second debt offer after a gap of 5 years. Its last offer was in the month of September 2016. At that time, it raised Rs. 7000 cr. with AAA ratings from CARE and BWR and offered coupon rates ranging from 8.55% to 9.15%. Now this company is coming out with its second debt offer of Secured/Unsecured, Subordinated, Redeemable Non-Convertible Debentures of the face value of Rs. 1000 each together amounting to Rs. 200 cr. as the base size and it has a greenshoe option to retain oversubscription to the tune of Rs. 800 cr., thus making an overall issue size of Rs. 1000 cr. under Tranche I, (which is also a shelf limit). 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 September 06, 2021, and will close on or before September 20, 2021. 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., Trust Investment Advisors Pvt. Ltd. and IIFL Securities 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 9.75 %. It has tenures of 24 months, 36 months, 60 months and 87 months. Unsecured NCDs only are having 87 months' tenure with Annual and Monthly interest payment options. Other 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 Q1 ended June 30, 2021, and the Fiscal Years 2021, 2020 and 2019, IBHFL's consolidated total revenue from operations was Rs. 2,320.69 crores, Rs. 9,927.42 crores, Rs. 13,216.44 crores and Rs. 17,019.62 crores, respectively. For the Q1 period ended June 30, 2021, its consolidated profit for the period was Rs. 281.69 crores and for the Fiscal Years 2021, 2020 and 2019, 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 June 30, 2021, and March 31, 2021, 2020 and 2019, its consolidated gross NPAs as a percentage of consolidated AUM were 2.86%, 2.66%, 1.84% and 0.88%, respectively, and r consolidated net NPAs (which reflect its gross NPAs less provisions for ECL on NPAs (Stage 3) for the three months ended June 30, 2021, and the years ended March 31, 2021, 2020 and 2019, as a percentage of consolidated AUM, were 1.55%, 1.59%, 1.24% and 0.69%, respectively. IBHFL's current debt-equity ratio of 4.20 will rise to 4.26 post this debt offering. As of June 30, 2021, its paid-up equity capital of Rs. 89.09 cr. is supported by free reserves of Rs. 15545+ cr. However, the company has reduced dividend pay-outs for the last three fiscal's year over year. It was Rs. 2057.11 cr. (FY19), Rs. 1592.67 cr. (FY20) and Rs. 416.62 cr. (FY21).

Conclusion / Investment Strategy

The last offer from IBHFL in September 2016 had AAA ratings while this offer has AA ratings and hence is a point of concern. The company has reduced dividend outgo for the last three fiscals. However, the market has a fancy for debt offer above A rating. In the light of falling interest rates, these lucrative rates offering debt issue may be considered for steady income.

Review By Dilip Davda on September 3, 2021

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 prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

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.


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