Indiabulls Consumer Finance Limited (ICFL) is launching its public issue of non-convertible debentures (NCDs) from Monday, 4th of February. The company wants to raise Rs. 3,000 crore from this issue, including the green-shoe option of Rs. 2,750 crore. These NCDs will carry interest rates in the range of 10.40% for 38 months and 11% for 60 months.
The issue is scheduled to close on March 4, unless the company decides to close the issue prematurely. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CARE.
Before we check how the issue looks from an investment point of view, let us take a look at some of its key features:
Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 2,750 crore, making the total issue size to be Rs. 3,000 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.
Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 11% p.a. for a period of 60 months, 10.90% p.a. for 38 months and 10.75% p.a. for 26 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available with 38 months and 60 months, and coupon rates for these periods are 10.40% p.a. and 10.50% p.a. respectively.
ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, effective October 1, 2018. So, you are no longer required to issue cheques to apply for these NCD issues. In case of physical applications, you need to sign on the application form as per your bank records.
Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CARE has rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, these NCDs are ‘Secured’ in nature.
NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.
Categories of Investors – The company has decided to categorise investors in the following four categories:
Category I – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 600 crore
Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 600 crore
Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 900 crore
Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 900 crore
Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first-come first-served basis, as well as on a date priority basis, i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.
Minimum Investment – An investor needs to invest a minimum of Rs. 10,000 in this issue i.e. 10 NCDs worth Rs. 1,000 each.
Listing, Premature Withdrawal – These NCDs are proposed to get listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchanges (NSE). The listing will take place within 6 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on the stock exchanges.
Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.
No TDS in Demat Form – Interest income with such NCDs is taxable in the hands of the investors and you will have to pay tax on the interest income while filing your income tax return. Moreover, as demat account is mandatory to invest in this issue, no TDS would get deducted from your interest income on NCDs held in demat form.
But, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.
Should you invest in Indiabulls Consumer Finance NCDs?
I’ll update this post soon.