By Geetanjali Kedia
India Infoline Housing Finance, wholly owned subsidiary and housing finance arm of listed broker India Infoline, is entering the debt capital market with a maiden public issue of secured redeemable non-convertible debentures (NCDs) of face value Rs. 1,000 each, to raise Rs. 250 crore with an option to retain another Rs. 250 crore, taking the total fund raising to Rs. 500 crore.
The issue opens on 12th December 2013 and closes on 20th December, with an option in company’s hands to either close the issue earlier or extend the closing. Minimum application amount is Rs 10,000, and in multiples of Rs, 1,000 thereof.
Rating: ‘AA-’ by CRISIL and CARE indicating high degree of safety for timely servicing of financial obligations.
Listing: To be listed on NSE and BSE with one NCD comprising a trading lot. NCD would be issued both in physical and demat but trading is necessarily in the demat form on the exchanges.
What’s on offer: The NCD issue has only a single investment option:
Frequency of interest payment
Coupon Rate (% pa)
Effective Yield (% pa)
Tax Adjusted Yield (% pa)*
*Assuming highest tax slab of 30.90%
The company is an NBFC undertaking housing and mortgage loans with assets under management (AUM) of Rs. 937 crore and networth of Rs. 301 crore, as of 30th September 2013. For FY13, its earned income of Rs. 45 crore with PAT at Rs. 14 crore while H1FY14 income stood at Rs. 39 crore with PAT of Rs. 12 crore. As of 30th September 2013, gross NPAs stood at Rs. 3.4 crore (0.46% of loan book), whereas net NPAs were 0.39%.
Rate of Return:
The 12.15% yield with monthly interest payment may seem attractive for retail investment in fixed income securities, given the longer tenure of 5 years of the instrument. This is better that bank FD, as no bank is offering interest rates in double digit on longer term fixed deposits. Comparing with other NCD offering currently underway, India Info’s effective yield of 12.15% pa is higher than Shriram City Union’s 11.50% pa yield for similar tenure of 5 years.
However, post-tax effective return (for highest tax bracket of 30.90%) is only 8.40% pa. In comparison with ongoing tax free bonds of HUDCO, which besides carrying the PSU-tag, better credit rating, long tenures (10, 15 and 20 years) have higher returns of 8.76%-9.01% for retail investors.
Thus, PSU bonds are a better instrument to park your money in than the NCD of private companies.
Give this issue a miss.