Non-banking financial company (NBFC) IIFL Finance Ltd on 6 December launched its public issue of secured non-convertible debentures (NCDs) to raise up to Rs 1,000 crore.
IIFL Finance’s offerings include home loans, gold loans, business loans, including loans against property, and medium and small enterprise financing, microfinance, construction and real estate finance, and capital market finance, catering to both retail and corporate clients.
The Fairfax-backed NBFC will issue secured NCDs worth Rs 100 crore, with a green-shoe option to retain oversubscription of up to Rs 900 crore, aggregating to a total of Rs 1,000 crore. The allotment will be made on first-come, first-served basis.
The NCDs offer the highest effective yield of 9 percent per annum for a tenor of 60 months. The NCDs are available in tenors of 24, 36 and 60 months. The frequency of interest payment is monthly, annually, and on maturity (60 months), while for other tenors it is annually and on maturity.
Key Details of the NCD Issue
- The lead managers to the issue are Edelweiss Financial Services Ltd., IIFL Securities Ltd., Equirus Capital Private Ltd., and Trust Investment Advisors Private Ltd.
- The NCDs will be listed on the BSE Ltd. and the National Stock Exchange of India Ltd. (NSE).
- It would issue the NCDs at face value of Rs 1,000.
- The minimum application size is Rs 10,000 across all categories.
- The public issue of the NCDs opens on January 6, 2023, and closes on January 18, 2023, with an option of early closure.
- The allotment will be made on a first-come, first-served basis.
What should investors do?
Experts say that beyond the ratings one needs to look at whether the company possesses the wherewithal to service the payouts.
“You may have a scenario where the company is stable, but the particular paper (security), keeping in mind whatever the collections are going towards, may not be as secure. So, not just the issuer needs to be looked at, but also for what purpose that money is being garnered, that needs to be looked at,” said Deepali Sen, Founder Partner, Srujan Financial Services LLP.
Kirtan Shah, Founder and CEO of Credence Wealth Advisors LLP, believes that repo rates in India will go up by another 25 basis points (bps) in the next policy, which will top out the rate-hike cycle in India, and probably two quarters later, rates may even start falling, but yields will start falling before that.
“If you want to park some money in private issues such as IIFL, try to avoid long durations like five, six or 10 years. Always look at 24 months, because the credit risk in 24 months is lower. Don’t lock yourself for long duration because such companies are always in need of capital, and so they will always come with offerings,” Shah said.