DHFL NCD Aug/Sept 2016 Issue Review: Due to the falling interest rates on bank fixed deposits and in absence of tax-free bonds investors are investing aggressively in Non-Convertible Debentures. We have seen couple of NCD?s issue witnessing enormous responses such as Dewan Housing Finance Corporation Limited (DHFL) Tranche I and Edelweiss NCD.
DHFL had come earlier in the first week of August with Rs.4,000 crore NCD which was subscribed 4 times in first day only. Since NCDs are allotted on first come first serve basis, it was closed on the very first day. To capitalize the thirst of the investors DHFL has come up with one more issue of its NCDs from this coming Monday i.e. 29th August. However, this time DHFL is offering NCD at slightly low interest rates of 9.10% to 9.25% for a period of 3 years, 5 years and 7 years. Let us sail through the issue details and various aspects of issue to decide whether to invest in DHFL NCD Tranche II issue or not.
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About Dewan Housing Finance Corporation Limited (DHFL)
Dewan Housing Finance Corporation Limited (DHFL) is active in Housing Finance sector in India and has been providing loans since 1984. Company has wide marketing and distribution network throughout India across 349 locations including 182 branches, 146 service centers, 18 circle/ cluster offices, 2 disbursement hubs and one collection center.
Company?s targeted customers are individuals, partnership firms and companies. The loans are given for purchase, self-construction, improvement and extension of homes, new and resalable flats, commercial properties and land. Company also provides non-housing loans including loans for commercial property, medical equipment, and for plant and machinery.
For the high performance DHFL?has been awarded many times in the past including Best Corporate Brand Award 2015 by Economic Times (Fiscal 2016), Best Housing Finance Company in the BFSI Sector by ABP News and World HRD Congress (Fiscal 2016) and India?s Most Trusted Housing Finance Brand by The Brand Trust Report (Fiscal 2016).
DHFL NCD August/September 2016 Issue Features
- Subscription Period:Monday August 29th, 2016 to Monday September 12th, 2016
- Investment Type:Secured Redeemable Non-Convertible Debentures
- Interest Rates (coupon rate)for Retail Investors: 9.10% p.a. for 3 years (36 months), 9.20% p.a. for 5 years (60 months) and 9.25% p.a. for 7 years (84 months).
- Additional Coupon: Additional 0.25% p.a. to senior citizen and equity shareholders and bond holders of company
- Interest Frequency: Annually (no monthly or cumulative interest rates options this time.)
- Face Valueof each debenture: Rs.1,000/-
- Minimum Investment: 10 NCDs (Rs.10,000/-) across all series
- Maximum InvestmentLimit for Retail Investor: No Limit
- Issue Size: Base Issue of Rs.2,000 crore with an option to retain over-subscription up to Rs.8,000 crore aggregating to a total up to Rs.10,000 rore.
- Allotment Preference: First Come First Serve
- Listing: NCDs are proposed to be listed on BSE and NSE.
- Rating: NCDs are rated ??CARE AAA [Triple A]? by Credit Analysis & Research Limited (?CARE?), and BWR AAA by Brickwork Ratings India Private Limited (?Brickwork?). It implies high degree of safety regarding timely servicing of financial obligations with a very low credit risk.
- Lead Managers:Edelweiss Financial Services Limited, A. K. Capital Services Limited, ICICI Bank Limited, SBI Capital Markets Limited, Trust Investment Advisors Private Limited ,Yes Securities (India) Limited, Axis Bank Limited, IndusInd Bank Limited and IIFL Holdings Limited
- Registrarof the Issue: Karvy Computershare Private Limited
- DHFL NCD prospectus?
- DHFL Application Formfor August/September 2016 Issue:?Application Form
DHFL NCD Category wise Allocation
|Category I||Qualified Institutional Bidders (QIBs)||Not more than 30% of the Issue i.e. Rs.3,000 crore|
|Category II||Non-Institutional Investors, Corporates (NIIs)||Not more than 10% of the Issue i.e. Rs,1,000 crore|
|Category III||High Net Worth Individuals (HNIs) including HUFs||Not more than 30% of the Issue i.e. Rs.3,000 crore|
|Category IV||Retail Individual Investors including HUFs||Not more than 30% of the Issue i.e. 300 crore|
|Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in Edelweiss Housing Finance NCD.|
DHFL NCD Investment Options
Dewan Housing Finance Corporation Limited (DHFL) Financial Performance
1. Company?s total revenue from operations has grown at CAGR of 31.60% over the past 5 fiscal years. Total revenue from operations for the year ended 31st March 2012 was Rs.2,435 crore which has risen to Rs.7,311 crore in last fiscal year ended 31st March, 2016. For the same period (2012 to 2016) profit after taxes of the company grew at CAGR of 24.20% i.e. Rs.306 crore in FY 2012 to Rs.729 crore in FY 2016.
2. As at March 31, 2016 and June 30, 2016 Company?s gross NPAs as a percentage of the loan book was 0.93% and 0.98% and the net NPAs as a percentage of the loan book was 0.58% and 0.62%.
3. DHFL has shown an increase of 18.52% in total revenue from operations on QoQ basis i.e. the topline revenue has increased from Rs.1,652 crore for the quarter ended 30th June, 2015 to Rs.1,958 crore for the quarter ended 30th June, 2016.
4. Operating profits have also increased from Rs.260 crore to Rs.302 crore for the same period on QoQ basis i.e. 16.50%. However, operating margins on sales is same as in last quarter of 15.50%.
5. Profit after tax has witness an uptrend of 21.37% on QoQ basis i.e. from Rs.173 crore to Rs.201 crore for the same quarter last year. However, PAT on sales has remained same at 10.50% for the same period on QoQ basis.
6. Housing loans sanctioned by the company during the quarter ended 30th June, 2016 amounted to Rs.8,880 crore as against Rs.7,858 crore during the previous corresponding quarter showing an increase of 12% and disbursement during the quarter ended 30th June, 2016 amounted to Rs.6,214 crore against Rs.4,938 crore during the previous corresponding quarter showing an increase of 26%.
7. Company has maintained required full assets cover as first pari-passu charge on the business assets including receivables, investments and assets excluding charge on investment in SLR securities of the Company on its Secured Non-Convertible Debt Securities as on 30th June, 2016.
Should You Invest in DHFL NCD August/September 2016 Trance II?
DHFL is engaged in providing housing loans and presently Government is emphasizing on Housing for All by 2022 which means that future of the company is bright and there are least chances of company is making default in repayment of investment and interest. Also the NCDs are secured in nature i.e. in the event of default by company NCD holders would get preference (but no guarantee) in repayment of investment along with accrued interest.
Interest rates offered by DHFL NCD are attractive in comparison to other fixed income schemes such as Bank Fixed Deposits. For the Investors falling in lower tax bracket of 10%, NCDs offers a marginal higher rate of returns as compared to bank fixed deposits but investors should not invest for longer tenure as NCDs bear high risk. For the investors falling in 20% or 30% tax slabs, they should better be off with other investment opportunities.
Unlike IPOs investors would get any significant listing gains by investing in DHFL NCD as there are many more listed bonds offering similar or higher rates.