NCD review: Indiabulls Consumer Finance debentures offer over 10%; should you invest?

They have tenor options with maturities of 400 days, 24 months, 36 months, and 60 months offering coupon rate of up to 10.61% p.a

Kumar Shankar Roy Jun 8, 2019

Debenture 2019Indiabulls Consumer Finance Limited (IBCFL), a 100% subsidiary of Indiabulls Ventures Limited (IBVL), has opened its Rs 1,000 crore public issue of Secured Redeemable Non-Convertible Debentures (NCDs) on May 30, 2019. The NCD issue is slated for closure on June 21, but may close earlier if adequate funds are raised sooner.

IBCFL is a non-deposit taking NBFC registered with the RBI and the NCDs proposed to be issued under this issue have been rated AA+ by Brickwork Ratings and AA (Outlook: Stable) by CARE. The NCD issue comes with tenor options with maturities of 400 days, 24 months, 36 months, and 60 months offering an attractive coupon rate of up to 10.61% p.a. In this context, investors are asking how safe is the issue.

In February 2019, when the previous offering from Indiabulls Consumer Finance had come, we at RupeeIQ had covered the offering here. Since the offering comes from Indiabulls group, the question of safety obviously comes up. There is no sweet way of saying this – The Indiabulls Group is not exactly a Bajaj group, Tata group or Mahindra group. NCDs from any issuer are not bank FDs. They have risk. So, let us see how safe is the latest tranche of NCDs, especially in the context of several reported defaults of payments in the debt industry.

For investors who want to know the basics of the latest NCD offering, the minimum application size is Rs 10,000. These NCDs are proposed to be listed on both BSE and the NSE.

Here is a graphic that shows the interest rate offered under which tenure. This will give you clear picture of the returns one can expect from this Indiabulls Consumer Finance NCD issue.

indiabulls NCD

About Indiabulls Consumer Finance

IBCFL focuses primarily on providing personal loans, business loans (unsecured SME loans and secured SME loans) and other loans. The company has diversified assets under management of Rs 11,227.7 crore as of March 31, 2019.

IBCFL is present in more than 100 cities throughout India, through which it markets its loan products, enabling itself to operate on a pan-India basis. It has a strong capital position with a capital reserves adequacy ratio (CRAR) of 37.47% and a well-matched ALM (asset and liability management) as on March 31, 2019.

Strengths & weaknesses

1. Support from parent group – Indiabulls group

Since it is a part of Indiabulls, IBCFL receives strong support from the group. There are managerial and operational linkages and financial flexibility

2. Experienced management team

The management team of IBCFL has extensive experience in financial services industry. It is headed by CEO Pinank Shah. Gagan Banga (Vice Chairman and CEO of Indiabulls Housing Finance) and Alok Mishra (former CMD Bank of India and Oriental Bank of Commerce) are on IBCFL board.

3. Loan portfolio

IBCFL has a presence in personal loans which constituted 33% of the total loan portfolio, secured SME loans (49%) and unsecured SME loans (18%) as on December 31, 2018. Its mobile app is ‘Indiabulls Dhani’.

4. Profit growth

Profit after Tax (PAT) stood at Rs.191.52 crore on a total income of Rs.700.07 crore during FY18. The Return on Total Assets grew to 6.71% for FY18

5. Liquidity profile

Rating agencies say there is no negative cumulative ALM mismatches across various time buckets. The liquidity profile was comfortable given the relatively shorter maturity profiles of assets. At the current maturity level, the company maintains around 10% of the total loan portfolio by way of cash and liquid mutual fund investments as a liquidity buffer.

6. Limited track record

IBCFL has limited track record and started its lending operations during FY17.

7. Untested portfolio

Though the company has scaled up its operations significantly, its loan portfolio remains largely unseasoned. Also, the asset quality of its loan portfolio is yet to be tested.

RupeeIQ take – With over 10% per annum return in NCDs, it is difficult to say no to. We understand the predicament of fixed income investors. Still, we would request investors to consider safety as the main parameter for investing in NCDs. These NCDs are AA+/AA rated. They are not triple A (AAA) rated. Investors should not have large positions in such NCDs. Use a portfolio approach. Recently, there are have been a lot of NBFC-related NCD issues. Do not take excessive exposure to similar rated or similar business model oriented companies. Limit higher risk NCDs exposure to 10-15% of your overall portfolio.

Disclaimer: The article is only for informational purposes. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at

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