Indiabulls NCD suits investors with a high risk appetite

Indiabulls Housing Finance Ltd has announced the launch of a public issue of secured or unsecured non-convertible debentures (NCDs), which will offer coupon rates ranging from 8.05% to 9.75% per annum. Tranche I of the issue has a base size of 200 crore with a greenshoe option of up to 800 crore, aggregating up to 1,000 crore.

The issue, which will be open for subscription during 6-20 September, has been rated AA with a stable outlook by Crisil Ratings Ltd AA+ with a negative outlook by Brickworks Ratings Pvt Ltd.

There are 10 series of NCDs available with a fixed coupon having tenures of 24 months, 36 months, 60 months 87 months with annual, monthly cumulative payout options.

The issue has been split into two parts — secured unsecured. The secured portion of the NCD will be backed by present future receivables current assets of the company, while no security will be created for the unsecured NCDs.

According to experts, unsecured NCDs are riskier than the secured NCDs as the bonds are not backed by the company’s assets.

Secured NCDs will have tenures of 24 months, 36 months 60 months, while unsecured NCDs will have a lock-in period of 87 months. Moreover, the highest coupon payout under the secured option would be 9.25%, 9.75% under the unsecured series.

Under the issue, 30% each of the overall issue size has been reserved for retail, HNI institutional investor categories, with a 10% quota for the non-institutional investor category.

“The rating is reasonably good even the coupon rate is attractive. Moreover, there is no long-term lock-in in the secured option. So, I would suggest investors to stay away from the unsecured investment because the company’s profits are declining there could be a hit from the lockdowns over the past 18 months. Investors who have reasonable risk appetite can go for it from the returns perspective that too in the secured portion only,” said Harshad Chetanwala, a Sebi-registered investment adviser co-founder of MyWealthGrowth.

“For retail investors with moderate risk appetite, the mutual fund route would be a better option,” he added.

The NCDs are proposed to be listed on BSE NSE most of the proceeds will be used for the purpose of onward lending, financing, for repayment of interest principal of existing borrowings.

Indiabulls Housing Finance is one of India’s largest housing finance companies has assets under management (AUM) of 79,213 crore with more than one million customers as of 30 June 2021.

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