Is it worthwhile investing in India Infoline Finance Ltd's unsecured NCD?

Posted by PersonalFN
Facebook  Twitter  Visit PersonalFN on Google Plus!  More...

Company Overview

India Infoline Finance Limited (IIFL) incorporated on July 07, 2004 was formerly known as India Infoline Investment Services Private Limited before going public. India Infoline is a leading company operating in the financial services space. It derives its income primarily from equity broking, third party products distribution and financing and investment activities. Based on the revised regulatory framework prescribed by RBI for NBFCs, IIFL was categorised as ‘Loan Company-Non Deposit Accepting' and is a systemically important non-deposit taking NBFC.

The aforesaid company focuses on mortgage loans, capital market finance, gold loan and healthcare finance.

Product wise Portfolio
(Source: Offer Document, PersonalFN Research)

Its loan portfolio as on March 31, 2012 revealed that the mortgage loans formed 44.7% of the total loan book, while the second and third position was occupied by gold loan and capital market financing which comprised 41.1% and 11.1% respectively.

In FY 2010-11, company included one more product to its product portfolio - healthcare financing. Healthcare financing includes medical equipment and project funding in the healthcare sector.

At present in order to augment the lending and working capital needs of the company, India Infoline Finance Ltd (IIFL) is currently offering unsecured Non-Convertible Redeemable Debentures (NCD) of face value of Rs 1,000 each at par aggregating to Rs 250 crore along with a green shoe option to retain oversubscription up to Rs 250 crore, thereby taking the total issue size upto Rs 500 crore.

The details of the offering (NCD) are as follows:
Issuer India Infoline Finance Limited
Offering Public Issue of NCDs aggregating to Rs 250 crore with an option to retain over-subscription up to Rs 250 crore for issuance of additional NCDs aggregating to a total of upto Rs 500 crore.
Rating ‘CRISIL AA-' by CRISIL & ‘ ICRA AA-' by ICRA
Security Unsecured Subordinated Debt
Face Value Rs 1,000 per bond
Issue Price At par (Rs 1,000 per bond)
Minimum Subscription 5 NCDs and in multiples of 1 Bond thereafter
  • Option I: 72 months
  • Option II: 72 months
  • Option III: 72 months
Coupon rate
  • Option I: 12.75% (Monthly Interest)
  • Option II: 12.75% p.a. (Annual Interest)
  • Option III:12.75% (Cumulative Option)
Reserved Individual (RI) Individuals applying for NCDs aggregating to a value not more than Rs 5 lacs
Unreserved Individual (UI) Individuals applying for NCDs aggregating to a value more than Rs 5 lacs
Trustee IDBI Trusteeship Services Limited
Listing NSE & BSE
Depository National Securities Depository Limited and Central Depository Services Limited
Registrars Link Intime India Private Limited
Issuance In physical and dematerialised form
Issue Open Date September 05, 2011
Issue Close Date September 18, 2011
Deemed Date of Allotment The date on which the Board of Directors/or duly authorised Committee of Directors approves the Allotment of the NCDs. All benefits relating to the NCDs including interest on NCDs shall be available to the Debenture Holders from the Deemed Date of Allotment. The actual allotment of NCDs may take place on a date other than the Deemed Date of Allotment.
Eligible Investors  
Category I
  • Public financial institutions, statutory corporations, scheduled commercial banks, co-operative banks and regional rural banks, which are authorised to invest in the NCDs;
  • Indian Provident funds, pension funds, superannuation funds and gratuity funds, authorized to invest in the NCDs;
  • Indian Provident funds, pension funds, superannuation funds and gratuity fund, which are authorised to invest in the NCDs;
  • Venture capital funds registered with SEBI;
  • Insurance companies registered with the IRDA;
  • National Investment Fund;
  • Mutual Funds registered with SEBI
Category II
  • Companies; bodies corporate and societies registered under the applicable laws in India and authorised to invest in the NCDs;
  • Resident Indian scientific and/or industrial research organizations, authorized to invest in the NCDs;
  • Public/private charitable/religious trusts which are authorised to invest in the NCDs;
  • Scientific and/or industrial research organisations, which are authorised to invest in the NCDs;
  • Partnership firms in the name of the partners; and
  • Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008.
Category III (RI and UI)
  • Resident Indian individuals; and
  • Hindu undivided families through the Karta
Note: PAN card is mandatory for subscribing to these NCDs. A self attested copy shall be enclosed along with the application form.

As seen above, investors' will have three options for subscription, earning a respective yield as presented below:

Series I II Option III
Minimum Application amount (Rs) 5,000 5,000 5,000
Thereafter in Multiples of (Rs) 1,000 1,000 1,000
Tenor 72 months 72 months 72 months
Interest Payment Monthly Monthly N.A. (since Cumulative)
Coupon 12.75% per annum 12.75% per annum N.A.
Tax slabs (%) 10.30 20.60 30.90 10.30 20.60 30.90 10.30 20.60 30.90
Effective Yield –Pre Tax (%) * 13.51 13.51 13.51 12.75 12.75 12.75 12.75 12.75 12.75
Post Tax Returns (%) * 12.05 10.60 9.17 11.43 10.12 8.81 11.73 10.66 9.55
(Source: Draft prospectus registered with SEBI. & PersonalFN Research)

Well, after reading the details of the NCD (as provided above), there may be still some more questions popping up, which are answered hereunder:

  • Will I get any tax benefit if I invest in these bonds?

    No, these bonds do not entitle you to any tax benefit nor are these any "infrastructure bonds", which make you eligible for an additional tax deduction under section 80 CCF.

  • What is the Tax Treatment of interest on these NCDs?

    The interest earned on the NCD is chargeable to tax, under "income from other sources", and will be brought to tax at the marginal rate of taxation. To simply put, it will be taxed as per the tax bracket applicable to your total income for the relevant assessment year. It is noteworthy that no tax will be deducted at source if these bonds are subscribed to in the demat form.

  • Can a minor apply to these bonds?

    Yes, a minor can apply for these bonds, but only and only through a guardian.

  • Can one apply in joint names?

    Yes, one may apply in a joint name. However, the demat accounts will also be required to be held in joint name and the order of applicant shall be the same as appearing in the demat account. Moreover, all payments will be made out in favour of the first applicant as well as all communications will be addressed to the first named applicant whose name appears in the application form and at the address mentioned therein.

  • Who will get the interest in case of joint application?

    In case of joint application, interest will be accounted to the first holder only.

  • My demat account is in joint name, but I want to apply is a single name?

    In case of a single application, demat account of the same single applicant would be necessary. Joint demat account would not do.

  • If I'm an NRI can I invest in these bonds?

    No, NRIs are not eligible to invest in these bonds.

  • Is there a lock-in period while investing?

    No. There is no lock-in period for these bonds.

  • In whose favour the cheque is to be made?

    Cheques/Drafts have to be made in the favour of "India Infoline Finance Limited- NCD Escrow" and crossed "A/C PAYEE ONLY".

Our View:

The evaluation of the company's financial health reveals that the capital adequacy ratio is reasonable at 17.86% (as against the minimum 15% prescribed by RBI), for tier I capital; which the company expects to enhance to 23% through this issue. The Net Non-Performing Assets (NPAs) of the company also constitute a mere 0.40% of the total loan book as on March 31st 2012. However, we think the company is relatively a new player (in the NBFC business) and is yet to prove its mettle, although in the past three years it has grown at a brisk pace. The loan book of IIFL jumped from Rs 956 crore in 2009 to Rs 6,746 crore in 2012, thereby reflect a growth of 91.8% CAGR. However this growth is mainly attributed to the growth in mortgage backed loans. Majority of disbursals have happened in 2011. While it appears that company has put risk management systems in place, any asset liability mismatch or a sudden spurt in NPA would be a big risk as it may weaken the financial position of the company. Moreover, this we think is relevant to take into account in the backdrop of a slowdown in the economy.

As far as the NCD offer is concerned, we think that minimum ticket size has been kept low at Rs 5000 to encourage the retail participation. Although stable ratings have been conferred for the issue (‘CRISIL AA'- by CRISIL and ‘ICRA AA'-Stable by ICRA) and yields are attractive, we think that the unsecured nature of the NCD (subordinated) from IIFL makes it a risky investment proposition. Hence, given that we recommend investors to stay away from the said NCD. However, if you risk appetite enables you to invest in such an unsecured NCD you may consider investing in the same to earn an attractive yield. Investors with cconservative and moderate risk profile may skip this NCD issue and wait for better rated "secured" NCDs from well established companies which may carry lower risk.

[Read More]


Get stories like this on the Yahoo app and discover more every day.
Download it now.
  • Mistry replies on Tata Sons' 'counter-allegations' IANS - 8 hours ago

    The replies came through an affidavit which was filed by Mistry's investment companies to the NCLT's Mumbai bench. The rejoinder comes after Tata Sons had filed an over 200-page affidavit with the NCLT earlier in January, rebutting charges levelled … More »

  • Software to comply with Indian labour laws unveiled IANS - 8 hours ago

    "The SaaS-based plug-and-play tool gives free access to 40,000 pages of the Indian labour laws for compliance management by enterprises, factories, shops and businesses in the country," said Simpliance Founder Anil D'Souza. "Labour law compliance … More »

  • 50% of BSE IPO subscribed on 1st day of offering IANS - 10 hours ago

    Mumbai, Jan 23 (IANS) Stock exchange major BSE's initial public offering (IPO) was subscribed by 50 per cent on the first day of the Rs 1,243.43 offering which started on Monday. According to the data ... … More »

  • Note ban boosts deposits, lowers bank loan growth: Report IANS - 10 hours ago

    New Delhi, Jan 23 (IANS) The recent demonetisation in India led to an immediate jump in current account and savings account (CASA) deposits, incremental lending saw a massive drop, while digital banking witnessed a major surge, a report said on … More »

  • Okinawa Autotech launches e-scooter Ridge IANS - 10 hours ago

    New Delhi, Jan 23 (IANS) Electric two-wheeler manufacturer Okinawa Scooters on Monday launched its first offering in the Indian market an e-scooter -- Ridge -- priced at Rs 43,702 (Ex-showroom, Delhi). ... … More »

  • Differential impact of demonetisation across ABS transactions: Ind-Ra IANS - 11 hours ago

    Mumbai, Jan 23 (IANS) Credit ratings agency India Ratings and Research (Ind-Ra) on Monday said it has observed differential impact of demonetisation across asset-backed securities (ABS) transactions. According to the agency's report -- Indian ABS … More »

  • India against EU, Canada-proposed dispute settlement at WTO IANS - 11 hours ago

    New Delhi, Jan 23 (IANS) India has opposed an informal proposal by the EU and Canada for a global investment pact with an investor-to-state dispute settlement (ISDS) mechanism at the WTO by which corporates can take governments to international … More »

  • EIH's Q3 net profit up 8.29% IANS - 11 hours ago

    Mumbai, Jan 23 (IANS) Hospitality major EIH on Monday reported a rise of 8.29 per cent in its stand alone net profit for the third quarter (Q3) of 2016-17. The company which was formerly known as the 'East ... … More »

  • Asian Paints net profit up, hit by demonetisation IANS - 11 hours ago

    Mumbai, Jan 23 (IANS) Paints major Asian Paints on Monday posted a marginal 1.5 per cent rise in consolidated net profit to Rs 489.31 crore in the quarter ended December 31, as compared to Rs 482.02 crore ... … More »

  • SBI calls for raising income tax exemption limits IANS - 12 hours ago

    Mumbai, Jan 23 (IANS) Presenting an agenda for the forthcoming Union Budget at a time when banks are flush with funds post-demonetisation, state-run SBI on Monday called for raising various income tax ... … More »

  • Bharti Infratel's Q3 net up 25% IANS - 13 hours ago

    New Delhi, Jan 23 (IANS) Telecom tower infrastructure services provider Bharti Infratel's consolidated net profit went up 25 per cent in the third quarter of 2016-17, the company said on Monday. The company posted a net profit of Rs 620 crore for … More »

  • Budgetary expectations lift Indian equities IANS - 13 hours ago

    Mumbai, Jan 23 (IANS) Hopes of budgetary incentives and healthy buying in metal, automobile and oil and gas sectors lifted the Indian equities markets on Monday. However, profit booking at higher levels ... … More »

  • FRBM Committee submits report on fiscal consolidation roadmap IANS - 13 hours ago

    New Delhi, Jan 23 (IANS) The Fiscal Responsibility and Budget Management (FRBM) Committee, headed by former Revenue and Expenditure Secretary N.K. Singh, submitted its report to Finance Minister Arun Jaitley on Monday with recommendations on the … More »

  • NEXTracker, CleanMax Solar to set up tracker system in Chennai IANS - 14 hours ago

    New Delhi, Jan 23 (IANS) American solar solutions provider NEXTracker announced on Monday that it is partnering with India's CleanMax Solar to supply a 30 MW solar tracker system to a project in Tamil Nadu. "NEXTracker has partnered with CleanMax … More »

  • HUL's net profit up 7% in Q3 IANS - 14 hours ago

    Mumbai, Jan 23 (IANS) FMCG major Hindustan Unilever on Monday reported a seven per cent increase in its net profit to Rs 1,037.93 crore in the quarter ended December 31, 2016 as compared to Rs 971.66 crore in the corresponding quarter last fiscal … More »

  • Strong rupee, budgetary expectations lift equities IANS - 16 hours ago

    Mumbai, Jan 23 (IANS) Rupee appreciation, coupled with hopes of positive incentives in the upcoming Union Budget and broadly positive Asian indices, lifted the Indian equities markets on Monday. The key ... … More »

  • Global semiconductor revenue to grow 7.2% in 2017: Gartner IANS - 17 hours ago

    Mumbai, Jan 23 (IANS) Worldwide semiconductor revenue is set to hit $364.1 billion in 2017, an increase of 7.2 per cent from 2016, representing a turnaround for the industry as it experienced 1.5 per cent growth in 2016, market research firm Gartner … More »

  • itel unveils 4G VoLTE-enabled smartphone at Rs 7,550 IANS - 18 hours ago

    New Delhi, Jan 23 (IANS) itel Mobile, part of Chinese mobile manufacturer Transsion Holdings, on Monday launched a new it1518 4G VoLTE-enabled smartphone at Rs 7,550. The 5-inch device houses 8MP rear ... … More »

  • Indian equities buoy on strong rupee, budgetary expectations IANS - 18 hours ago

    Mumbai, Jan 23 (IANS) Indian equities markets traded on a flat-to-positive note during the mid-afternoon trade session on Monday, as rupee appreciation, coupled with hopes of positive incentives in the ... … More »

  • Amazon India to empower Naga women entrepreneurs IANS - 18 hours ago

    Bengaluru, Jan 23 (IANS) With a view to drive digital literacy among women entrepreneurs in Nagaland, Amazon India on Monday partnered with the state government and the National Skill Development Corp (NSDC) to provide them a global platform to sell … More »

  • 5 reasons you should bother about Budget 2017 Simplus Information Services - 20 hours ago

    The government reveals the income and expenditure incurred in the year gone by. It is the estimate that the government makes about the income and expenditure for the year ahead. The government announced the demonetization of currency notes in … More »

  • Is digitisation the need of the hour? Simplus Information Services - 20 hours ago

    What makes digitisation or digitalisation so important? The conversion of data from analogue to digital has been going on since the 1950s. Nowadays, digital technology is helping restructure businesses, organisations, and economies. … More »

  • Coal India discontinues Forward e-auction Scheme 2007 IANS - Sun 22 Jan, 2017 7:12 PM IST

    Kolkata, Jan 22 (IANS) Following special forward e-auction for power sector and exclusive e-auction for non-power consumers being conducted in a "regular manner", Coal India Ltd (CIL) has advised its subsidiaries to stop conducting the Forward … More »

  • Kudankulam Unit 2 generates full capacity of 1,000 MW IANS - Sun 22 Jan, 2017 7:08 PM IST

    Chennai, Jan 22 (IANS) The second 1,000 MW atomic power reactor at the Kundankulam Nuclear Power Project (KNPP) in Tamil Nadu has attained its maximum capacity, the Russian builders announced on Sunday. "Kudankulam NPP Unit No 2 has for the first … More »

  • Non-life insurers' premium income grows over 25% in December IANS - Sun 22 Jan, 2017 5:04 PM IST

    Kolkata, Jan 22 (IANS) Non-life insurance companies posted over 25 per cent increase in their gross premium income (direct premium income underwritten) to Rs 9,760.23 crore in December compared to Rs 7,777.38 ... … More »


      Recent Quotes
      Symbol Price Change % ChgChart 
      Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
      You need to enable your browser cookies to view your most recent quotes.
    • Recent Quotes News

        Sign-in to view quotes in your portfolios.