NCDs or non-convertible debentures are instruments issuing which companies raise funds. These are referred to as non-convertible as they do not have the option of conversion into company equity or stocks.
Now here we will discuss the latest launched unsecured NCD issued of IIFL NCD that is aimed at garnering Rs. 1000 crore. The NCD is slated to offer a return of up to 10%, this is crucial at the current time when rates on fixed income instruments of say 5.4% for a 5-10 year period at a bank like SBI.
Here is a run through to all the details of the NCD for you to take an investment decision for the available investment option:
1. Issue details:
Issue offer date: The issue of IIFL 10% NCD opened on July 6 and will be available until July 28 for subscription
Issue price/face value- Rs. 1000 per NCD
Issue Closes on 28th July, 2021
Registrar Link Intime India Pvt Limited
Allotment First Come First Serve Basis ***
Listing On BSE Ltd and NSE Ltd
Issue Price Rs. 1,000 per NCD
Face Value Rs. 1,000 per NCD
Minimum Application Rs. 10,000 (10 NCDs) & in multiples of ₹ 1,000 (1 NCD)
Issue Size Rs. 10,000 million (₹ 1,000 cr)
Nature Unsecured Subordinate Redeemable NCD
Credit Ratings CRISIL AA/ Outlook STABLE and Brickwork AA+/ Outlook Negative
2. Company profile:
IIFL Home Finance is the fully owned subsidiary of IIFL Finance and is the housing finance company. The company is into offering home loan, secured loan as well as affordable housing project finance loans.
The NCD issued has been rated by CRISIL as AA/ Outlook STABLE and Brickwork AA+/ Outlook Negative. The rating suggest high degree of safety with respect to timely servicing the financial obligations and carry low credit risk.
4. NCD objectives:
The proceeds mopped up from the offering shall be put to onward lending, financing, repayment or pre-payment of principal as well as interest in respect of existent borrowing as well as general corporate purposes. The company's prospectus available for the purpose said it intends to "utilise the funds which are being raised through this Tranche I Issue, after deducting the Issue related expenses to the extent payable by our Company ("Net Proceeds"), towards funding the following objects i.e. onward lending, financing, repayment/prepayment of interest and principal of existing borrowings (collectively, referred to herein as the "Objects") and other corporate purposes.
|Interest payment freuency||Annual||Monthly||Cumulative|
|Tenure||87 months||87 months||87 months|
|Coupon % per annum||10%||9.6%||NA|
Interest earned on these NCDs are fully taxable as per the investor's slab rate in the year of the receipt of the interest income.
These NCDs need to be invested into by investors who have a good enough risk-appetite as IIFL Home Loan NCD offering is not backed by the company's financial assets and if the company's financials weaken at any point during the NCD tenure, the company may default. This is even as the credit rating for the NCD is pretty Ok with a ‘Stable' outlook but notably can change over time. Furthermore, the instrument is a bet for a longer tenure so not suitable for all and those investors who do not understand credit risk should give this offer a complete miss despite the high interest rate.