IIFL Home Finance Ltd. plans to issue collateralized non-convertible debenture (NCD) bonds in December 2024. These NCDs offer an opportunity to earn attractive fixed returns over a specified period of time. Should you consider investing in these NCDs? Let’s analyze the details, features, and associated risks to make an informed decision.
About IIFL Home Finance Limited
Established in 2009, IIFL Home Finance Ltd is a subsidiary of IIFL Finance, India’s leading financial services provider. IIFL Home Finance is focused on providing home finance solutions, offering products such as home loans, real estate loans, secured business loans, and affordable housing project finance to individual and corporate customers.
As of September 30, 2024, the company served over 427,048 customers through 387 branches located in 18 states and 2 union territories. It primarily operates in key regions such as Delhi-NCR, Gujarat, Andhra Pradesh, Telangana, and Tamil Nadu. With a borrowing amount of Rs 16,867.54 crore as of September 2024 and an average borrowing cost of 8.32%, the company is well-positioned in India’s growing housing finance market.
IIFL Home Finance NCD – Issued December 2024 Details
- Publisher: IIFL Home Finance Co., Ltd.
- Instrument Type: Secure Redeemable NCD
- Tenure options: Multiple options from 24 months to 60 months
- Interest rate: up to 9.25% per year
- Yield to Maturity (YTM): up to 9.27%
- Minimum investment: ₹10,000 (10 NCDs of ₹1,000 each)
- Investment Mode: Demat only
- Credit rating:
- CRISIL AA/Stable (indicating high safety and low credit risk)
- IND AA/Stabilized by India Ratings and Research
- Issue Size: Please refer to the prospectus for detailed size and allocation.
interest rate
| option | I | II | Ⅲ | Ⅳ | V | VI | VII | VIII | IX |
|---|---|---|---|---|---|---|---|---|---|
| Interest payment frequency | yearly | N.A. | monthly | yearly | N.A. | monthly | yearly | N.A. | yearly |
| Tenure (months) | twenty four | twenty four | 36 | 36 | 36 | 60 | 60 | 60 | 84 |
| Coupon (% per year) | 8.85% | N.A. | 8.65% | 9.00% | N.A. | 8.90% | 9.25% | N.A. | 9.25% |
| Effective yield (%/year) | 8.85% | 8.85% | 9.00% | 9.00% | 9.00% | 9.27% | 9.25% | 9.25% | 9.25% |
| Amount at maturity (Rs.) | 1,000.00 | 1,184.85 | 1,000.00 | 1,000.00 | 1,295.20 | 1,000.00 | 1,000.00 | 1,557.00 | 1,000.00 |
Why invest in IIFL Housing Finance NCD?
- Attractive interest rates: These NCDs offer annual interest rates of up to 9.25%, giving you higher returns compared to many fixed deposit options.
- Safe NCDs: This bond is backed by the company’s assets and offers higher security compared to unsecured NCDs. In the event of financial difficulties, secured bond holders will receive priority repayment.
- Good credit rating: A high credit rating (CRISIL AA/Stable) indicates a high ability to repay in a timely manner and low credit risk.
- Consistent performance: IIFL Home Finance has a track record of consistent financial performance and stable profit margins, making it a reliable investment option.
Risks to consider before investing
- High risk of customer default: Being an NBFC, the company is exposed to non-performing assets (NPAs), which can impact its profitability in adverse market conditions.
- Industry risks: The NBFC sector has seen defaults and repayment delays by some companies in the past. Although IIFL Home Finance has a stable track record, macroeconomic factors can impact its performance.
- No deposit insurance: Unlike bank fixed deposits, which are insured up to Rs 500,000 under DICGC, NCD investments do not have such insurance, which increases the risk for investors.
Comparison with alternatives
These NCDs have a yield of up to 9.27%, while some small finance banks offer fixed deposits at interest rates of up to 9% and are guaranteed up to Rs 500,000 under DICGC. Investors seeking lower risk with slightly lower returns may prefer insured term deposits.
How can I invest in IIFL Home Finance NCD?
NCDs are available in dematerialized form. Investors can apply through broker platforms like Zerodha, ICICI Direct, or any platform where they hold a Demat account. The application form can also be accessed from the lead manager’s website listed in the prospectus.
Should you invest in IIFL Home Finance NCD?
These NCDs offer great opportunities for investors who seek higher fixed income returns and can tolerate moderate risk. The safety and high credit ratings of bonds attract such investments.
However, conservative investors may prefer safer alternatives, such as term deposits with small finance banks, which offer similar returns with deposit insurance. Evaluate your risk tolerance and financial goals before making your decision.
For detailed conditions and risks, please see IIFL Home Finance NCD December 2024 Prospectus.
