India Infoline Finance Ltd’s, IIFL NCD plans to raise Rs 525 Crore, Issue details, Returns, Features and Rating
India Infoline Finance Ltd’s Rs.525 crore public issue of secured redeemable, non-convertible debentures opened. India Infoline Finance Ltd is a subsidiary of India Infoline Ltd, which is a comprehensive financial services company.
The company is a non-banking finance company, which primarily focuses on mortgage loans and gold loans. Other smaller segments of lending extend to capital market financing, medical equipment financing and commercial vehicle financing.
Features
There are four series on offer that are redeemable after three and five years and two interest payout options—monthly and annual. The coupon offered across series is 12% per annum. You can invest a minimum of Rs.5,000 or buy five bonds with a face value of Rs.1,000 each (see graph).
While there is no call option, the company can call for a buyback of debentures before maturity. The debentures are secured against immovable property, current assets and other book debt and receivables of the company. This means if the company defaults on its payment, you have a claim on its assets for getting your dues.
The debentures are proposed to be listed, hence if you need an early exit you can do so in the secondary market.
Risk
The debentures are rated CARE AA by CARE Ltd and BWR AA/Stable by Brickwork. This indicates low credit risk and high probability of the company sticking to its financial obligations.
At the group level, two financial metrics that work for the company are its low level of non-performing assets at about 0.5% for FY13 despite the current slowdown in the economy. The group also has sufficient capital adequacy ratio at 21.6% for FY13. According to Nirmal Jain, chairman, India Infoline, “A majority of our loans are in the retail segment and here we have very strict credit checks with almost all borrowers undergoing a Cibil (Credit Information Bureau India Ltd) check.”
Should one invest?
The return is attractive, but comes with its share of risk. Dhakan pointed out that bonds issued by a company like Tata Capital, which has similar credit rating, currently trades at a yield of 10-10.5%, so the additional premium on this bond points at higher risk, given the environment in which India Infoline Finance is operating in at present. On a post-tax basis, if you fall in the 30% tax bracket you will earn around 8.3% annually and if you are in the 10% bracket you will earn around 10.8% annually.
While the company is advertising a yield of 12.68% per annum for the monthly payout option, keep in mind that is the internal rate of return or IRR. This means you can get a yield of 12.68% only if you are able to reinvest each of the monthly payouts again at a rate of 12% per annum. It’s unlikely that this will happen; opting for monthly payout would mean that you need to use that income stream.
CLICK HERE TO CHECK IIFL WEBSITE FOR MORE DETAILS
India Infoline Finance Ltd’s Rs.525 crore public issue of secured redeemable, non-convertible debentures opened. India Infoline Finance Ltd is a subsidiary of India Infoline Ltd, which is a comprehensive financial services company.
The company is a non-banking finance company, which primarily focuses on mortgage loans and gold loans. Other smaller segments of lending extend to capital market financing, medical equipment financing and commercial vehicle financing.
Features
There are four series on offer that are redeemable after three and five years and two interest payout options—monthly and annual. The coupon offered across series is 12% per annum. You can invest a minimum of Rs.5,000 or buy five bonds with a face value of Rs.1,000 each (see graph).
While there is no call option, the company can call for a buyback of debentures before maturity. The debentures are secured against immovable property, current assets and other book debt and receivables of the company. This means if the company defaults on its payment, you have a claim on its assets for getting your dues.
The debentures are proposed to be listed, hence if you need an early exit you can do so in the secondary market.
Risk
The debentures are rated CARE AA by CARE Ltd and BWR AA/Stable by Brickwork. This indicates low credit risk and high probability of the company sticking to its financial obligations.
At the group level, two financial metrics that work for the company are its low level of non-performing assets at about 0.5% for FY13 despite the current slowdown in the economy. The group also has sufficient capital adequacy ratio at 21.6% for FY13. According to Nirmal Jain, chairman, India Infoline, “A majority of our loans are in the retail segment and here we have very strict credit checks with almost all borrowers undergoing a Cibil (Credit Information Bureau India Ltd) check.”
Should one invest?
The return is attractive, but comes with its share of risk. Dhakan pointed out that bonds issued by a company like Tata Capital, which has similar credit rating, currently trades at a yield of 10-10.5%, so the additional premium on this bond points at higher risk, given the environment in which India Infoline Finance is operating in at present. On a post-tax basis, if you fall in the 30% tax bracket you will earn around 8.3% annually and if you are in the 10% bracket you will earn around 10.8% annually.
While the company is advertising a yield of 12.68% per annum for the monthly payout option, keep in mind that is the internal rate of return or IRR. This means you can get a yield of 12.68% only if you are able to reinvest each of the monthly payouts again at a rate of 12% per annum. It’s unlikely that this will happen; opting for monthly payout would mean that you need to use that income stream.
CLICK HERE TO CHECK IIFL WEBSITE FOR MORE DETAILS
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