On strong investor response, IIFL Finance on Saturday announced that its NCD issue aimed at aggregating up to Rs. 1000 crore will be shut for subscription on March 18 instead of March 23. Here is a complete lowdown on the issue and whether or not you should consider subscribing to the NCD issue:
1. Issue details:
The IIFL Finance NCD issue opened on March 3 and will now close on March 18 as against the earlier announced closure date of March 23 as it had an option of early closure. The unsecured redeemable non-convertible debentures (NCDs) will be issued at a face value of Rs. 1000 and the issue price is Rs. 1000 per NCD. Across all categories, minimum application size is Rs. 10,000. The allotment of NCDs will be made on first-come-first-served basis.
The lead managers to the issue are Edelweiss Financial Services Limited, IIFL Securities Limited and Equirus Capital Private Limited. The NCDs will be listed on the BSE Limited and National Stock Exchange of India Limited (NSE), to provide liquidity to investors.
2. Issue objective:
The funds raised from the issuance of NCDs will be put in growing the business and capital appreciation.
3. About IIFL Finance:
IIFL Finance is one of the country's largest retail-centric non-banking financial services company that primarily caters to the credit need of the underserved population. "IIFL has an impeccable track record of more than 25 years and all the bond issues and the debt obligations have always been paid on time", said Rajesh Rajak, CFO, IIFL Finance. The funds raised will be used to meet the credit need of more such customers and accelerate our digital process transformation to enable a frictionless experience, added Rajak. Its loan book stands at Rs. 42,264 crore.
3. Terms of the issue:
|Interest payment frequency||Annual||Monthly||At maturity|
|Tenure||87 months||87 months||87 months|
|Coupon (% per annum)||10%||9.6%||NA|
|Effective yield ( p.a.)||10%||10.03%||10.03%|
4. Credit rating:
The issue has been rated AA by CRISIL and AA+ by Brickwork. Rating agencies have reaffirmed the credit rating of IIFL Finance, indicating that the NCDs are highly safe in respect of timely servicing of financial obligations and bear very less credit risk.
5. Should you invest in 10% IIFL Finance NCD issue?
Considering coupon rate of 10% per annum, IIFL Finance NCD issue is a good bet in comparison to other debt products. In the current landscape, bank FDs of 3 year tenure fetch around 5.1%, while liquid funds offer anywhere between 2.8-3 percent. Also, IIFL Finance NCDs coupon rate is much higher than 10-year government securities which currently offer 6 percent.
Moreover as most experts see interest rate to trend lower owing to abundant liquidity in the post-Covid world for the next few years, it shall be best to lock in the high yield of 10.3%. However one major drawback with these NCDs is that these are unsecured i.e. are not secured by underlying assets of the company and can default on principal and interest payment in case of losses and hence investors should largely give the issue a miss.