Wednesday, September 5, 2012

India Infoline Finance Ltd (IIFL) NCD

India Infoline Finance Ltd (IIFL) has come out with a public issue of unsecured redeemable non-convertible debentures (NCDs) of face value of Rs 1,000 each aggregating up to Rs 500 crore. The company plans to raise Rs. 250 crore and has the option to retain additional subscription up to Rs. 250 crore, taking the aggregate to Rs. 500 crore. The company is in the business of lending to individuals and companies.

The issue shall open on 5 September, 2012 and shall close on 18 September, 2012. The issue offers high interest rate of 12.75% per annum. Minimum application amount is Rs 5000.

This NCD is in the nature of subordinated debt and will be eligible for Tier-II capital. The bonds on offer are redeemable after six years and come with three interest payout options - monthly, annual and cumulative.

The company has been expanding business and its profit after tax has grown at a compounded annual growth rate (CAGR) of 45%; the loan book grew at 64% CAGR since 2007-08 till FY12. But total long-term borrowings have grown at a CAGR of 108%.

IIFL NCDs will be listed on NSE and BSE and will have a tradeable lot size of one NCD.

Recommendation:

This issue of NCDs is unsecured, which means that in the event of a claim, it would be settled only after the claim of other creditors are settled. However, they come before equity shareholders in the priority list. So if the company goes bankrupt, investor in this NCD will not be first in line to receive payment, in fact other bond holders will be ahead of the investor. The issue is rated Crisil AA- stable and ICRA AA- stable. This indicates investment grade security with high probability of meeting its financial obligations. The cumulative option has the best absolute return as money invested doubles at a yield of 12.75% per annum in six years; the monthly payout option is also attractive and works for those who would like to get a pre-determined fixed monthly income. Although the interest offered is high, it is a compensation for the unsecured nature of bonds. If you wish to invest in this issue, invest only limited amount as this is unsecured.

Subscription:

India Infoline Finance NCD issue has received a good response from investors and has been oversubscribed by 2.36 times


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