Dhani Loans NCD Issue With 11% Coupon- A Good Bet For Short Term

Dhani Loans and Services previously called Indiabulls Consumer Finance has come up with secured NCDs for investment. For freshers, NCD are fixed income instruments which bear return depending on the scheme i.e. quarterly, annually or cumulative.

NCD details:

Issue size: Base issue size: Rs. 150 crore with an option to retain over-subscription up to Rs. 150 crore aggregating Rs. 300 crore in value.

Issue period- January 4-January 27, 2021

These NCDs by the NBFC subsidiary are secured in nature i.e. backed by a cover of 1.25 times on the principal and interest thereon.

Minimum investment: Rs. 10000

About Dhani:

The company is a NBFC registered with RBI and offers a gamut of financing facilities offline and online. The company is a non-deposit taking 100% subsidiary of Dhani Services Limited. As digitization transformed the banking and financial sector, the company recognized a great opportunity and ventured into the retail lending space with Dhani Loans and Services Limited.

Credit rating:

IVR AA/ Stable outlook- This rating by Infomerics signifies low credit risk and hence there is likely a probability of timely servicing of obligations.

Interest rate and tenure of payment

Option	Tenure in months	Interest payment	Coupon Interest	Effective Yield
I	370 days	Cumuative	NA	10.00%
11	24	Annual	10.50%	10.50%
111	24	Cumulative	NA	10.50%
IV	24	Monthly	10.03%	10.50%
v	36	Annual	11.00%	10.99%
VI	36	Cumulative	NA	11.00%
VII	36	Monthly	10.49%	11.00%

Conclusion:

It is a good bet considering the low interest rate regime with security extended as being secured in nature. Further, the highest coupon rate of 11 percent for a 3 years term is a good bet, if at all the rates even trend higher in some time. However be mindful of deploying not a huge chunk of your investible surplus as anytime the rating of the debenture can change.

Also, as regards its financials the company has been incurring losses for some time, so to some analysts and experts the higher 'A' rating is not in sync. So at best the instrument shall be a good bet for high risk profile investors.

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