Indiabulls Housing Fin NCD Tranche-II Sept. 23 issue review - (May apply)

•    IHFL is a housing finance company, also offering other financial services as well. 
•    This is the 10th debt issue from IHFL since September 2016.
•    The issue is rated AA/Stable by CRISIL and ICRA.
•    It offers coupon rates ranging between 8.88% to 10.25%.
•    Investors looking for steady income may consider moderate investment for the medium to long term.

ABOUT COMPANY:
Indiabulls Housing Finance Ltd. (IHFL) is a non-deposit-taking housing finance company ("HFC") registered with the NHB. It is also a notified financial institution under the SARFAESI Act. The company pre-dominantly offer housing loans and loans against property to a varied client base which comprises (i) salaried employees; (ii) self-employed individuals; (iii) micro, small and medium-sized enterprises ("MSMEs") and (iv) corporates. 

IHFL focuses primarily on long-term secured mortgage-backed loans. It also offers mortgage loans to real estate developers in India in the form of lease rental discounting for commercial premises and construction finance for the construction of residential premises. A majority of its Loan Book comprises housing loans, including in the affordable housing segment. As of March 31, 2023, housing loans and non-housing loans on a standalone basis constituted 57% and 43%, respectively, of its Loan Book.

As of June 30, 2023, its Loan Book was Rs. 47483.47 cr., on a standalone basis, and Rs. 56276.03 cr., on a consolidated basis respectively. It has now shifted to an asset-light business model, focusing on co-lending of loans along with banks, other financial institutions and credit funds and an increased sell-down of its loan portfolio. As of June 30, 2023, it had a network of 217 branches spread across India and a direct sales team of 8,726 employees, on a consolidated basis, who are located across its network. As of June 30, 2023, its consolidated borrowings (other than debt securities) were Rs. 29095.07 cr. consolidated debt securities were Rs. 17564.04 cr., and consolidated subordinated liabilities were Rs. 4254.79 crores. It relies on long-term and medium-term borrowings from banks and other financial institutions, including external commercial borrowings and issuances of non-convertible debentures. 

ISSUE DETAILS:
The company is coming out with its Tranche-I secured redeemable NCD of Rs. 1000 each to mobilize Rs. 100 cr. and it has a green shoe option to retain oversubscription to the tune of Rs. 100 cr., thus making an overall issue size of Rs. 200 cr. It has a shelf limit of Rs. 2000 cr. The issue opens for subscription on September 06, 2023, and will close on or before September 20, 2023. The minimum application to be made is for 10 NCDs (i.e. Rs. 10000) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE and NSE. This is the 10th debt issue from the company since September 2016.

IHFL is spending Rs. 6.88 cr. for this debt issue. From the net proceeds, it will utilize at least 75% for onward lending, financing or repayment with interest on certain borrowings and up to 25% for general corporate purposes. 

This issue is jointly lead managed by Nuvama Wealth Management Ltd. (erstwhile known as Edelweiss Financial Services Ltd.), Elara Capital (India) Pvt. Ltd., and Trust Investment Advisors Pvt. Ltd., while IDBI Trusteeship Services Ltd. is the Debenture Trustee. KFin Technologies Ltd. is the registrar of the issue. 

This debt offer has coupon rates ranging from 8.88% to 10.25% and tenors of 24 months, 36 months, 60 months, 84 months, and 120 months. The frequency of interest payment will be Monthly, Annually or Cumulative as per the selection of the series applied. The company is offering a 0.25% additional incentive to the shareholders/bondholders of the previous issue by it or its subsidiaries. 

The company has allocated 30% for Institutions, 10% for Non-Institutions, 30% for HNIs and 30% for Retail investors. 

ISSUE RATING: 
This debt offer is rated CRISIL AA/Stable by CRISIL Ratings Ltd., and ICRA AA/Stable by ICRA Ltd. These ratings are not a recommendation to buy, sell or hold securities and investors should make their own decisions. These ratings are subject to suspension, revision or withdrawal at any time by the assigning rating agencies and should be evaluated independently of any other ratings.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, IHFL has (on a consolidated basis) posted a total income/net profits of Rs. 10030.12 cr. / Rs. 1201.59 cr. (FY21), Rs. 8993.90 cr. / Rs. 1177.74 cr. (FY22), and Rs. 8725.79 cr. / Rs. 1127.68 cr. (FY23). Thus its top and bottom lines posted declining trends. For Q1 of FY24 ended on June 30, 2023, it earned a net profit of Rs. 296.19 cr. on a total income of Rs. 1915.62 cr.

As of June 30, 2023, its net NPAs stood at 2.14%. Its debt-equity ratio stood at 2.85 which will rise 2.86 post this issue.  As of the said date, its Rs. 89.72 cr. equity capital was supported by free reserves of Rs. 17485.86 cr.