DSIJ Mindshare

India Infoline Finance NCD: A Secure Option?

India Infoline Finance (IIFL), a 98.87 per cent subsidiary of India Infoline (a leading player in the Indian financial services segment), is tapping the market to raise approximately Rs 500 crore by issuing nonconvertible debentures (NCD) in the nature of subordinated debt.

The company plans to issue NCDs worth Rs 250 crore with an option to retain an over-subscription of Rs 250 crore. The funds raised through the issue will be used to finance activities such as investment and lending, to repay its existing loans and for working capital requirements.

About IIFL
IIFL is a systemically important non-deposit taking non-banking  finance company (NBFC) and is registered with the Reserve Bank of India (RBI). Broadly, the business of IIFL includes mortgage loans, capital market finance, gold loans and healthcare finance. As of March 31, 2012, around 85 per cent of the loan book was accounted for by mortgage and gold loans, capital market finance accounted for 12 per cent and the remaining was in healthcare finance.

Over the past two years, the company’s financials have seen a robust growth. In FY2012, its revenues increased by 84 per cent to Rs 953 crore on a consolidated basis, while the net profit grew by 14 per cent to Rs 105 crore on a YoY basis. The loan book of the company stood at Rs 6746 crore as against Rs 3289 crore in FY2011. The net interest margin (NIM) also showed an improvement of 28 basis points to 7.45 per cent. Meanwhile, the asset quality deteriorated slightly, as the net NPAs increased by four basis points to 0.40 per cent as on March 31, 2012.[PAGE BREAK]

Issue Information
IIFL has given three options in the NCD offer, with an attractive yield of 12.75 per cent for tenure of 6 years . The fi rst option has monthly interest payments, and hence, its effective yield comes to 13.52 per cent. The second option has annual interest payments, while the third option has a cumulative payment option that would give you Rs 10272.5 at the end of 6 years.

Note that the minimum application for the issues is of Rs 5000 (five NCDs with a face value of Rs 1000). Thereafter, the application can be made in multiples of Rs 1000 or one NCD. The NCDs will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The issue opened on 5th September, 2012 and will close on 18th September, 2012.

The following table shows the horizon and the rate of interest available under various options:

[PAGE BREAK]


Conclusion
The allotment would be on a ‘first come first served’ basis. Given the attractive coupon rate, there is a possibility that investors would rush in, and hence, one should not wait for the last day to subscribe.

The debentures that were issued by the company and listed on the exchange in the past are trading above their face value of Rs 1000. This is because the interest rates, which are expected to move southwards, will further help the debenture price to move higher. Hence, going forward, there exists the possibility that the price of the listed debenture and that of the NCDs (post listing) would move northwards. However, investors should note that the volumes on the exchanges are quite low and one should not invest merely to see some listing gains.

Of the three options, we, at Dalal Street Investment Journal, believe that one should go with the first one as it would provide regular liquidity as well as handsome returns. One can diversify the risk going ahead, as we believe that there could be more of kind of issues. Therefore, you can invest in this NCD with limited exposure.


DSIJ MINDSHARE

Mkt Commentary28-Mar, 2024

IPO Analysis29-Mar, 2024

Expert Speak29-Mar, 2024

Mindshare29-Mar, 2024

Multibaggers28-Mar, 2024

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR