DHFL NCD
Dewan Housing Finance Corporation Limited NCD (DHFL NCD) issue will on May 22,2018 and comprises of a public issue of up to 12 crore secured redeemable non-convertible debentures (NCDs) with a face value of Rs 1,000 each, for Rs 3,000 crore. The issue has an option to retain over subscription (green shoe) of up to Rs 9,000 crore, thus the aggregate  size of DHFL NCD issue stands at Rs 12,000 crore.

The DHFL NCD issue broadly has following options:
  • 3 years- 8.90%( Annual/Monthly)
  • 5 years- 9.00%(Annual/Monthly)
  • 7 years- 9.00%(Annual)
  • 10 years- 9.10%(Annual)
DHFL NCD issue:
Issue TypeSecured Redeemable Non-Convertible Debentures
Issue Period Opens on 22/0/18 ( First come first basis), till 03/06/18
Issue SizeBase Issue Rs.3000 Crore with an option to retain upto Rs.12,000 crores.
Face ValueRs.1,000/-
Minimum Application SizeRs.10,000/- (10 NCDs) thereafter in multiples of Rs.1000/- (1 NCD)
Credit RatingCARE & Brickwork ‘AAA’ with a ‘Stable’ outlook. 
About DHFL:

Dewan Housing Finance Corporation Ltd. (DHLF), is a deposit-taking housing finance company registered with the NHB and focused on providing financing products for the LMI segment in India primarily in Tier II and Tier III cities and towns. It has been active in the housing finance sector in India since 1984. DHFL provides secured finance primarily to individuals, partnership firms and companies for the purchase, self-construction, improvement and extension of homes, new and resalable flats, commercial properties and land. It also provides certain categories of non-housing loans, asset management services, mutual fund products and insurance products. As at March 31, 2016, DHFL’s gross NPAs of DHFL stood at 0.93%, 0.94% and 0.96% as at March 31, 2016, 2017 and 2018, respectively.

DHFL NCD issue Structure

DHFL NCD issue is structured into following categories of Investors: 
Category I – QIBs– 25% of the issue;Rs. 3,000 crore
Category II – Non-Institutional Investors – 10% of issue; Rs. 1,200 crore
Category III – HNIs i.e. above Rs. 10 lakhs – 30% of issue; Rs. 3,600 crore
Category IV – Retail  Investors, including HUFs – 35% of issue;  Rs. 4,200 crore

Options for Retail:
SeriesInterest FreqTenorCoupon %Eff Rate  p.a. %
IAnnual38.98.9
IIAnnual599
IIIAnnual799
IVAnnual109.19.1
VMonthly38.568.9
VIMonthly58.659
VIIAnnual3Mibor+2.16%Mibor+2.16%
Earlier NCD Issues by DHFL
  • DHFL  had earlier approached the markets in August 2016  with NCD issue of 4,000 crore and in August 2016 for 10,000 crore.
  • Out of these NCDs the two most traded NCDs are DHFL NP and DHFL NC. These are trading at YTM (Yield to Maturity ratio)  of around 9.1 as per details indicated below: 
NSE CodeDHFL NCDHFL NP
BSE Code935814935840
BSE ID930DHFL26B925DHFL23B
Market Price  (Rs.)10821069.98
Coupon Rate (%)9.39.25
Typeannual interestannual interest
Face Value (Rs.)10001000
Yield to Maturaity (YTM)9.11%9.12%
Allotment Date16-08-201609-09-2016
Redemption   Date16-08-202609-09-2023
Last interest  date16-08-201709-09-2017
Next Interest Date16-08-201809-09-2018
ISININE202B07HV0INE202B07IO3
Years Left for Maturity8.249325.31233
  • Additional 0.10% Coupon rate  for Senior Citizens ( for alottees)
  •  initial allottees will be paid a one-time additional incentive of 0.50% for the 5 year annual as well monthly interest payment options, 0.70% for the 7 year option and 1% for the 10 year NCD option. Incentive will be paid on maturity and only to investors who hold these NCDs for full duration. No incentive will be paid with the 3-year interest payment options.
  • Available both in Demat and Physical Form
  • Listing at NSE and BSE
  • Allotment will be made on a first-come first-served basis.
Assessment:

  • NCDs are taxable, thus the return get reduced by individual’s Tax bracket.
  • TDS is not deucted if NCDs are held in Demat form.
  • The issue of  DHFL NCD has almost same interest rate as the recent issue of Edelweiss Retail Finance NCD which has recently listed but DHFL NCDs enjoy better credit rating of AAA
  • Some investors are able to get upfront brokerage from brokers in range 1% which increases the YTM (Yield to Maturity).
  • The newly listed NCDs of Edelweiss Retail Finance NCD have been able to trade at par or about 1-1.5% above. 
  • I do not intend to apply in DHFL NCD issue as I already have significant exposure to earlier NCDs issued by DHFL in two tranches in 2017. If I were to park some money in these NCDs I would prefer 3 year annual option as interest rates could harden over the long run and Generally I would not prefer to invest for very long periods with private companies in their NCDs. 
  • Investors looking for a fixed interest income can get better rates than Banks FDs in these NCDs and can invest preferably in 3 year NCD.
  • Forthcoming JM Finance NCD (in May end)  are rated lower (AA)  but are expected to offer higher interest rates. 
Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.