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Tata Capital Hsg. Fin. Jan.-20 Tranche-I NCD issue review (Subscribe for Long Term)

  • This is the maiden debt offer from Tata group's housing finance arm.
  • CRISIL, ICRA has rated this offer as AAA/Stable.
  • It offers higher coupon rate for Unsecured NCDs having 120 months tenure.
  • The Company has good financial track record with rising top and bottom lines.
  • Investment may be considered for long term.

About Company:

Tata Capital Housing Finance Ltd. (TCHFL) is one of India's leading non-deposit taking housing finance companies registered with the NHB. It was incorporated in 2008 as a wholly-owned subsidiary of TCL and accordingly is a part of the Tata Capital Group which is part of the larger Tata group.

TCHFL focuses primarily on providing affordable home loans, home equity and construction finance. For Fiscal 2019, it made total loan disbursements of Rs. 11101.11 cr. As of September 30, 2019, its gross Non-Performing Assets ("NPAs") in terms of value and as a percentage of outstanding loans were Rs. 400.59 cr. or 1.45 %, respectively and net NPAs in terms of value and as a percentage of our net outstanding loans were Rs. 145.06 cr. or 0.53 %, respectively.

Since 2009, it has grown to become one of the key HFC in India based on loans and advances from financing activity of Rs. 27838.75 cr. as of September 30, 2019. It has a strong marketing and distribution network in 88 branches throughout India as of September 30, 2019. Its network provides with a pan-India presence across Tier I, Tier II and Tier III cities in India. Credit decisions are taken in accordance with the defined internal parameters and procedures. It also relies on external channels such as direct sales agents for referring potential customers.

TCHFL's focus growth areas for the business are (i) affordable housing through increasing its reach into Tier II and Tier III cities, (ii) developing partnerships with property developers, (iii) leveraging the "Tata" brand and (iv) increasing utilization of alternate business channels, including digital platforms.

Debt Offer Details:

For the purpose of onward lending, financing and for repayment/prepayment of interest and principal of existing borrowings (75% of fund mobilized) as well as general corpus fund need (25% of fund mobilized), TCHFL is coming out with debt offer of Secured and/or Unsecured subordinated Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 500 crore with a green shoe option to retain oversubscription up to Rs. 1500 cr. making the overall issue size of Rs. 2000 cr. . It has an overall shelf limit up to Rs. 5000 crore.

Issue opens for subscription on 07.01.2020 and will close on or before 17.01.2020. Minimum application is to be made 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. Allotment will be done on "First come-first served" basis. Application is to be made in ASBA mode only. This is the maiden debt offer from the company. The company will be spending Rs. 20.75 crore to mobilize Rs. 2000 cr.

This issue is rated as CRISIL AAA/Stable by CRISIL, ICRA AAA/Stable by ICRA. This rating indicates highest degree of safety regarding timely servicing of financial obligations and carry very low credit risk.

Issue is jointly lead managed by Edelweiss Financial Services Ltd. and A K Capital Services Ltd. While IDBI Trusteeship Services Ltd. is the debenture trustee KFin Technologies Pvt. Ltd. (Erstwhile Karvy Fintech Pvt. Ltd.) is the registrar to the issue.

These NCDs have tenures of 36 months, 60 months, 96 months and 120 months. It offers coupon rates ranging from 8.00% to 8.55% based on the choice of investors. Frequency of interest payments will be monthly or annually as per the choice of investors. For Unsecured category of 120 months, TCHFL offers coupon rate of 8.70% p.a.

Specific terms and conditions in connection with each series of NCDs

  Series 1 Series 2 Series 3 Series 4 Series 5 Series 6
Type of NCD Secured Secured Secured Secured Secured Unsecured
Minimum Application ₹10,000 (10 NCDs) across all Series
Face Value/ Issue Price of NCDs ₹1,000
In Multiples of thereafter (₹) ₹1,000 (1 NCD)
Frequency of Interest Payment Annually Monthly Annually Monthly Annually Annually
Tenor 36 Months 60 Months 60 Months 96 Months 96 Months 120 Months
Coupon Rate (Retail) for Category I & II 8.00% 7.92% 8.20% 8.01% 8.30% 8.55%
Coupon Rate (Retail) for Category III & IV 8.10% 8.01% 8.30% 8.10% 8.40% 8.70%
Effective Yield for Category I & II 7.99% 8.21% 8.19% 8.30% 8.29% 8.54%
Effective Yield for Category III & IV 8.09% 8.30% 8.29% 8.40% 8.39% 8.69%
Amount on Maturity ₹1,000 ₹1,000 ₹1,000 ₹1,000 ₹1,000 ₹1,000

Financial Data:

TCHFL has posted total revenue/net profits of Rs. 2440.01 cr. / Rs. 50.49 cr. (FY19). For the H1 of FY20 it has earned net profit of Rs. 23.70 cr. on total revenue of Rs. 1494.89 cr. As on 30.09.19 it's paid up equity capital of Rs. 309.71 cr. has a support of free reserves of Rs. 697.99 cr. On the said date it's Tier-I capital adequacy ratio stood at 13.06%. Its Gross and Net NPAs stood at 1.45% and 0.53% on 30.09.19.

Its current debt equity ratio of 9.93 will stand enhanced to 11.93 post issue of Rs. 5000 cr. of debt instruments. This is raising a bit concern. 


Conclusion / Investment Strategy

This being a debt offer from housing finance company of Tata group, investors looking for steady regular income may consider investment in this AAA/Stable rated secured NCD issue for long term. Risk savvy investors may consider investment in Unsecured NCDs that offers higher coupon rate. (Subscribe for long term).

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Jan 1, 2020

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.

Email: dilip_davda@rediffmail.com

The Tata Capital Housing NCD Jan 2020 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Tata Capital Housing NCD Jan 2020 worth investing. The Tata Capital Housing NCD Jan 2020 Note sets the NCD expectations in systematic way which tells you if Tata Capital Housing NCD Jan 2020 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Tata Capital Housing NCD Jan 2020 by providing NCD recommendations i.e. subscribe, avoid and neutral.


1 Comments

Safe Player
1. Safe Player  Jan 5, 2020 00:25 I Like It. | I Don't Like It. | Report Abuse Reply
Rarely u see unsecured papers being offered to retail investors




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