1. Details of the problem:
Issue date: The IIFL 10% NCD issue was opened on July 6 and will be available until July 28 for subscription
Issue price / face value – Rs. 1000 per MNT
Closing of the issue on July 28, 2021
Registrar Link Intime India Pvt Limited
Allotment on a first come, first served basis ***
Listing on BSE Ltd and NSE Ltd
Issue price Rs. 1,000 per MNT
Face value Rs. 1000 per MNT
Minimum application Rs. 10,000 (10 MNT) & in multiples of ₹ 1,000 (1 MNT)
Issue size Rs. 10,000 million (₹ 1,000 cr)
Redeemable subordinated unsecured nature NCD
CRISIL AA / Outlook STABLE and Brickwork AA + / Outlook Negative credit ratings
2. Company profile:
IIFL Home Finance is the 100% subsidiary of IIFL Finance and is the housing finance company. The company offers real estate loans, secured loans as well as financing loans for affordable housing projects.
3. Assessment:
The issued CRS was rated by CRISIL as AA / Outlook STABLE and Brickwork AA + / Outlook Negative. The rating suggests a high degree of security with respect to the timely servicing of financial obligations and carries low credit risk.
4. Objectives of NCDs:
The proceeds of the offer will be used for the loan, financing, repayment or early repayment of principal as well as interest on existing borrowings as well as for general corporate purposes. The company’s prospectus available for this purpose stated that it intended “to use the funds that are raised through this Tranche I issue, after deducting expenses related to the issue to the extent payable by our company (“Net Proceeds”), to finance the following objects i.e. subsequent loans, financing, repayment / early repayment of interest and principal of existing loans (collectively, hereinafter referred to as “Objects”) and for other business purposes.
5. Returns:
| Series | I | II | III |
|---|---|---|---|
| Frequency of interest payments | Annual | Monthly | Accumulation |
| Mandate | 87 months | 87 months | 87 months |
| Coupon% per year | ten% | 9.6% | N / A |
| Effective yield | ten% | 10.03% | 10.02% |
6. Taxation:
Interest earned on these CRS is fully taxable at the investor’s slab rate in the year the interest income is received.
7. Conclusion:
These NCDs should be invested by investors who have a sufficiently good appetite for risk, because the real estate loan offer from IIFL is not supported by the financial assets of the company and if the finances of the company are ‘weaken at some point during NCD’s tenure, the company may default. This is even if the CRS credit rating is pretty decent with a “stable” outlook, but notably can change over time. In addition, the instrument is a bet for a longer duration, so it is not suitable for everyone and investors who do not understand the credit risk should drop this offer despite the high interest rate.
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