Edelweiss Housing Finance NCD is open for subscription bearing coupon rates of 9.50%, 9.75% and 10% for tenure of 3 years, 5 years and 10 years with monthly, annual and cumulative interest payment options for retail/HNI investors. Let us sail through the features, pros and cons of the Edelweiss Housing Finance NCD and decide whether to invest in it or not?
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- About Edelweiss Housing Finance Limited (EHFL)
- Edelweiss Housing Finance NCD July 2016 Issue Features
- Edelweiss Housing Finance NCD Investment Options
- Edelweiss Housing Finance Limited Financials
- Should You Invest in Edelweiss Housing Finance NCD?
About Edelweiss Housing Finance Limited (EHFL)
Incorporated in 2008, Edelweiss Housing Finance Limited (EHFL) is Housing finance arm of Rashesh Shah?s Edelweiss Group focused majorly on providing secured loans to cater the needs of Individuals as well as Corporates. Apart from secured loans, company also offers small unsecured loans to rural customers for shorter time period of up to 2 years.
Edelweiss Housing Finance Limited offers four types of products i.e. Home loan which comprises 37% of loan book, Loan against Property which comprises 27% of loan book, Construction Finance which comprises 20% of loan book and Rural Finance which comprises remaining 16% of loan book as on 31st March, 2016.
The ownership of the company is held by two companies namely Edelweiss Commodities Services Limited (77.61%) and Edelweiss Financial Services Limited (22.39%).
Edelweiss Housing Finance NCD July 2016 Issue Features
- Subscription Period: Friday July 8th,2016 to Wednesday 27th, 2016
- Investment Type: Secured Redeemable Non-Convertible Debentures
- Interest Rates (coupon rate) for Retail Investors: 9.50% p.a. to 10.00% p.a. depending on tenure
- Additional Coupon: Additional 0.25% p.a. to senior citizen and equity shareholders and bond holders of company
- Interest Frequency: Monthly, Yearly or Cumulative as per option chosen
- Face Value of each debenture: Rs.1,000/-
- Minimum Investment: 10 NCDs (Rs.10,000/-) across all series
- Maximum Investment Limit for Retail Investor: No Limit
- Issue Size: Base Issue of Rs.250 crore with an option to retain over-subscription up to Rs.250 crore aggregating to a total up to Rs.500 crore.
- Allotment Preference: First Come First Serve
- Listing: NCDs are proposed to be listed on BSE and NSE.
- Rating: NCDs are rated ?CARE AA [Double A]? by Credit Analysis & Research Limited (?CARE?), [ICRA] AA by ICRA Limited and BWR AA+ 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: SBI Capital Markets Limited and Edelweiss Financial Services Limited
- Registrar of the Issue: Karvy Computershare Private Limited
- Edelweiss Housing Finance NCD prospectus?
- Edelweiss Housing Finance NCD Application Form for July 2016 Issue:?
Edelweiss Housing Finance NCD Investment Options
Edelweiss Housing Finance NCD Category wise Allocation
|Category I||Institutional Investors||Not more than 20% of the Issue i.e. 100 crore|
|Category II||Non-Institutional Investors, Corporates||Not more than 20% of the Issue i.e. 100 crore|
|Category III||Retail Individual Investors including HUFs||Not more than 60% 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.|
Edelweiss Housing Finance Limited Financials
Company?s total income and profit after tax (PAT) for the year ending March 31, 2016 stood at 2,733.39 million and 382.14 million respectively. Company?s loan book was 23,872.67 million and 15,087.29 million as of March 31, 2016 and March 31, 2015 respectively. Company?s capital adequacy ratio as of March 31, 2016 and March 31, 2015 computed on the basis of applicable NHB requirements was 19.40% and 29.13% respectively, compared to the NHB stipulated minimum requirement of 12%. Company?s Gross NPAs as a percentage of total loan assets were 1.17% and 0.75% as of March 31, 2016 and March 31, 2015 respectively. Company?s net NPAs as a percentage of net loan assets were 0.83% and 0.60% as of March 31, 2016 and March 31, 2015 respectively.
Read: Invest through Peer-to-Peer Lending Sites for Higher Return in India
Should You Invest in Edelweiss Housing Finance NCD?
Pros of Edelweiss Housing Finance NCD
- In the scenario of falling interest rates, Edelweiss Housing Finance NCD is providing attractive interest rate of 9.50% to 10% per annum. Also the debentures are secured in nature which means in case of default by company investors would get priority in repayment of capital along with interest.
- The Company?s income from operations and PAT witnessed a CAGR of 76.20 %, and 71.10 % respectively over the last four Financial Years from FY 2012 to FY2016.
- The loan book of the Company has witnessed a CAGR of 49.50 % over the last four fiscal years. However, with the increasing revenue from operations, NPA tends to increase which can be seen from the figures above.
Cons of Edelweiss Housing Finance NCD
- NCDs are not very liquid and not frequently traded in secondary market, so one cannot get out as and when required.
- There are couples of more NCDs listed on bourses which are providing higher yield in comparison to Edelweiss Housing Finance NCD. However the remaining tenure of listed NCDs is pretty short and buying from the market entail additional brokerage charges.
- NCDs are taxable, thus the return get reduced by marginally. So for the investors falling in high tax bracket of 30%, investing in NCDs does not make sense at all. They should rather go with Tax-Free Bonds.
Real Estate sector was sluggish for the past 2 years but with the new initiatives taken by the Government; this sector is going to perform well in upcoming years. Thus the financials of the Edelweiss Housing Finance Limited is going to be good and chances of making default in paying interest is very low.
Secondly, for the investors falling in lowest tax bracket of 10%, NCDs offers a marginal high rate of return as compared to bank fixed deposits but one should not invest in NCDs for longer tenure because longer tenure increases the risk.
Interest rates are most likely to decline in coming months, so upcoming NCDs of Dewan Housing Finance and Srei Infrastructure Finance may offer NCDs at lower interest rates. If interest rates in the market decline, the bonds price could increase and one may book profits in short span of time. So it is advisable to park small part of portfolio in the Edelweiss Housing Finance NCD.
NCDs are for conservative investors or for investors reaching to or have attained retirement. Young investors should rather invest in stocks of blue chip companies either directly or through mutual fund scheme.
How NCDs are Taxed in India?
Tax on Interest Income
Interest received/accrued from NCDs is taxable, if the interest income crosses the threshold limit of Rs.5,000 per annum. Tax will be deducted at source if NCDs are held in physical form but if NCDs are held in DEMAT form than investors needs to add the interest income under income from other sources and pay tax as per his/her applicable tax slab. Eligible investors can provide Form 15G /15H.
Tax on Sale of NCDs before Maturity
NCDs are listed on secondary market and can be bought and sold before maturity. If sold within one year than the gains shall be short-term and tax is to be paid as per your tax slab. But if holding period exceeds one year than the gains shall be long-term and tax is to be paid at 10% without indexation.
How to Invest in Edelweiss Housing Finance NCD?
You can invest in Edelweiss Housing Finance NCD either through physical mode or online mode. Physical modes require PAN copy, address proof and cancelled cheque along with the duly filled application form.
If you have DEMAT account, you can simply apply in Edelweiss Housing Finance NCD through ASBA (Application Supported by Blocked Amount) facility provided by banks.