Company Overview

India Infoline Investment Services Limited (IIISL) is a wholly owned subsidiary of India Infoline Limited (IIFL). 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 & investment activities.

 

IIISL is a non deposit taking non Banking Finance Company (NBFC) focused on mortgage and capital market finance activities. Its loan book position as on March 31st 2011 revealed that the mortgage loans formed 60% of the total loan book whereas the capital market financing had a share of 35%. Gold loans too, formed a part of the total loan book with a trivial 4%. In FY 2010-2011, company included one more product to its product portfolio, healthcare financing. Healthcare financing includes medical equipment and project funding in the healthcare sector.

 

Thus, in order to augment the lending and working capital needs of the company, IIISL is currently offering secured Non-Convertible Redeemable Debentures (NCD) of face value of Rs 1,000 each at par aggregating to Rs 375 crore along with a green shoe option to retain oversubscription up to Rs 375crore.

 

The details of the offering (NCD) are as follows:

Issuer	India Infoline Investment Services Limited
Offering	Public Issue of NCDs aggregating to Rs 375 crore with an option to retain over-subscription up to Rs 375 crore for issuance of additional NCDs aggregating to a total of up to Rs 750 crore.
Rating	‘CARE AA-' by CARE & ‘ ICRA AA-’ by ICRA
Security	Pari Passu with other secured creditors and priority over unsecured creditors
Face Value	Rs 1,000 per bond
Issue Price	At par (Rs 1,000 per bond)
Minimum Subscription	5 Bonds and in multiples of 1 Bond thereafter
Tenure	Option I: 36 months Option II: 40 months Option III: 60 months
Coupon rate	Option I: 11.70% for category I, category II and category III investors Option II: 11.70% p.a. (cumulative option) for category I, II and III investors Option III: 11.70% for category I and category II investors: 11.90% for category III investors.
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
Interest Payment	First day of April every year
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	Demat form only
Issue Open Date	August 4, 2011
Issue Close Date	August 12, 2011
Deemed Date of Allotment	Deemed date of allotment shall be the date of issue of the Allotment Advice / regret.
Eligible Investors	Category I	Category II	Category III
	Public Financial Institutions, Statutory Corporations, Commercial Banks, Co-operative Banks and Regional Rural Banks, which are authorised to invest in the NCDs 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	Companies; bodies corporate and societies registered under the applicable laws in India and authorised 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 Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008	Resident Indian individuals Hindu Undivided Families through the Karta

Note: PAN card is mandatory for subscribing to these bonds. A self attested copy shall be enclosed along with the application form.

 

Investors’ will also have the following options available at the time of subscribing to the issue:

 

	I			II			III
Options	RI and UI			RI and UI			RI and UI
Minimum Application amount in Rs	Rs 5000			Rs 5000			Rs 5,000
Thereafter in Multiples of	Rs 1,000			Rs 1,000			Rs 1,000
Tenor	36 months			40 months			60 months
Interest Payment	Yearly			N.A.			Yearly
Coupon	April 1 every year			N.A.			April 1 every year
Coupon	11.70% per annum			N.A.			11.90% per annum
Tax slabs (%)	10.3	20.6	30.9	10.3	20.6	30.9	10.3	20.6	30.9
Effective Yield –Pre Tax (%) *	11.70	11.70	11.70	11.70	11.70	11.70	11.70	11.70	11.70
Post Tax Returns (%) *	10.48	9.28	8.08	10.61	9.51	8.39	10.66	9.44	8.21

(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 Bonds? Are these Bonds Tax Free?
  
  No, the interests on these bonds are not tax free – they are chargeable to tax. The interest income will be taxed under “income from other sources”, and will be brought to tax at the respective income tax rates you fall under. No tax will be deducted at source as these bonds are issued a demat form and are listed on the exchange.
   
• 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 “IIISL –NCD IPO-Escrow” and crossed “A/C PAYEE ONLY”.



 

OUR VIEW:

In our opinion the yields on investment offered by IIISL are attractive. The credit rating too, allotted to the issue is stable (‘CARE AA’- by CARE and ‘ICRA AA’-Stable by ICRA). Minimum ticket size has purposefully been kept low at Rs 5000 to encourage the retail participation. Capital adequacy ratio is reasonable, 29.73%, for tier I capital (Against the 15% prescribed by RBI). Net NPA (Net Non Performing Assets) constituted 0.36% of the total loan book as on March 31st, 2011, which is considerably low. Lower the net NPA better it is for the health of the company.

However, IIISL is relatively a new player in the NBFC business and yet to prove its mettle. It started its operations in 2005. In past three years IIISL has grown at a brisk pace. Loan book of IIISL jumped from Rs 667.4 crore in 2009 to Rs 2,858.7 crore in 2011, growing at 81.2% CAGR. However this growth is mainly attributed to the growth in mortgage backed loans. Majority of disbursals have happened in 2011. Though apparently it seems that company has put risk management systems into proper 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. Besides, capital market lending, which is considered a risky business due to volatility of the underlying collateral, forms a 35% of the total loan book.

Considering all odds, we recommend investors to subscribe for the issue only and only if one wants to earn at the rate higher than the rate offered by bank FDs and has high risk appetite. Conservative and moderately aggressive investors may skip this issue and wait for better rated NCDs from well established companies which may carry lower risks.

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Comments
wayprofit@gmail.com Apr 12, 2012 Your blog is really meaningful and if stock market traders use this information then I am sure no one will lose money in the share market. Hope you agree with me Nse, BSE and MCX Tips
sales@medmaster-m.ru Aug 19, 2011 Weeeee, what a quick and easy solution.
arredondo@notaria173.com Aug 20, 2011 You really found a way to make this whole process easier.

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