Indiabulls Housing Finance Ltd. (IHFL) is an NHB-registered non-deposit-taking housing finance company (“HFC”). Under the SARFAESI Act, it is also a financial institution that has been notified. To a diverse clientele that includes (i) paid employees, (ii) self-employed people, (iii) micro, small, and medium-sized enterprises (“MSMEs”), and (iv) corporates, the company primarily offers home loans and loans against property.
IHFL primarily concentrates on lengthy secured loans with mortgage insurance. Additionally, it offers mortgage loans to Indian real estate developers in the form of construction finance for the development of residential premises as well as lease rental discounting for commercial structures. Mortgages, especially those for affordable housing, make up the majority of its loan book.
Housing loans and non-housing loans, taken separately, made up 57% and 43%, respectively, of its Loan Book as of March 31, 2023. On a standalone basis, as of March 31, 2023, its Loan Book was Rs. 48703 crore, while on a consolidated basis, it was Rs. 57011 crore. With a concentration on loan co-lending with banks, other financial institutions, and credit funds and an accelerated sell-down of the loan portfolio, it has now switched to an asset-light business model.
It had a network of 217 branches spread out over India as of March 31, 2023, giving it a Pan-India presence. On a consolidated basis, it had 2,128 direct sales team members as of the mentioned date, dispersed throughout the network. In order to suggest new consumers, it also depends on outside channels like direct sales representatives. Additionally, IHFL offers a platform called e-house Loans for online house loan completion that enables users to apply for loans and upload the necessary documentation.
Issue Details
The company is releasing its Tranche-I secured redeemable NCD of Rs. 1000 each to raise Rs. 100 cr. Additionally, it has a green shoe option to keep any oversubscription in the amount of Rs. 100 cr., making the total issue size Rs. 200 cr. shelf cap is Rs. 2000 crore. The subscription period for this issue begins on July 10, 2023, and ends on or before July 21, 2023. The minimum application amount is 10 NCDs, or Rs. 10,000, with subsequent applications being made in multiples of 1 NCD, or Rs. 1000. NCDs will be listed on BSE and NSE after allotment. Since September 2016, the company has issued its ninth debt issue.
IHFL will invest Rs. 13.50 crore to address this debt problem. It will use at least 75% of the net proceeds for future lending, financing, or interest-bearing repayment of some borrowings and up to 25% for general corporate purposes.
While IDBI Trusteeship Services Ltd. is the Debenture Trustee, this issue is jointly led and managed by Edelweiss Financial Services Ltd., Elara Capital (India) Pvt. Ltd., and Trust Investment Advisors Pvt. Ltd. As the issue’s registrar, KFin Technologies Ltd.
This debt offer has tenors of 24 months, 36 months, and 60 months, with coupon rates ranging from 8.88% to 10.15%. Depending on the series applied, the frequency of interest payments will be either monthly, annual, or cumulative. The corporation is providing shareholders and bondholders of prior issues it or its subsidiaries made a 0.25 per cent extra reward.
Issue Rating
This debt offer has been given a CRISIL AA/Stable rating by CRISIL Ratings Ltd. and an ICRA AA/Stable rating by ICRA Ltd. Investors should make their own decisions; these ratings do not constitute a recommendation to purchase, sell, or hold stocks. These ratings should be analysed independently of all other ratings because they may be suspended, revised, or withdrawn at any time by the assigning rating agencies.
Allocation Ratio
The corporation has set aside 30% for institutions, 10% for non-institutions, 30% for high-net-worth individuals, and 30% for retail investors.
Financial Performance
IHFL has (on a consolidated basis) reported total income/net profits of Rs. 10030.12 crore/Rs. 1201.59 crore (FY21), Rs. 8993.90 crore/Rs. 1177.74 crore (FY22), and Rs. 8725.79 crore/Rs. 1129.69 crore (FY23) for the last three fiscal years. Thus, the company’s top and bottom lines showed a downward tendency.
Its net NPAs for the aforementioned times were, respectively, 1.90%, 2.21%, and 2.24%. As of March 31, 2023, its free reserves totalled Rs. 17271.53 crore, which supported its equity capital of Rs. 89.72 crore. After this issue, the debt-to-equity ratio will increase from 3.02 to 3.13.
Issue Analysis
Pros:
1. The NCDs have a rating of AA/Stable. As AA/Stable-rated securities are classified as investment grade, it is presumed that the underlying credit risk is quite low.
2. The effective yield ranges from 8.88% to 10.15 %, which is substantially (3 to 4%) greater than FD rates.
3. In this IPO, Primary holders will receive incentives of up to 0.25 per cent per year. Indiabulls has established a firm presence in India with 130 branches and over 8000 channel partners capable of executing new growth strategies effectively.
4. The company is adept at implementing new technologies in order to reduce expenses and penetrate untapped markets.
Cons:
1. The business’s overall revenue has declined over the past three years.
2. Pandemics have caused loan books to become less seasoned.
The Bottom Line
This is the housing finance division of Indiabulls Group. For the previous three fiscal years, the company’s top and bottom lines showed falling patterns. Investors seeking a stable income may store money for the medium to long term, given its AA/Stable ratings from CRISIL and ICRA.