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Secured & Unsecured Taxable NCD Issue

14 Sep 2016

Indiabulls Housing Finance Ltd Product note

Summary:
Indiabulls Housing Finance Limited has come up with the 1st tranche of Secured and Unsecured Redeemable Non Convertible Debentures (NCDs) of face value of Rs. 1,000 each
for an amount of Rs. 3500 crore (Base issue Size) with an option to retain oversubscription upto Rs. 3500 crore - for a total amount aggregating upto Rs. 7000 crore (Shelf limit).
The issue will open for subscription from September 15, 2016 to September 23, 2016 (The Company has the option of closing the issue on an earlier date, once it receives the
amount it has targeted). The company will be paying an interest ranging between 8.55% p.a to 9.15% p. a. on these bonds.
The proposed NCDs issue has been rated CARE AAA (Triple A)by Credit Analysis & Research Ltd (CARE) and BWR AAA by Brickwork Ratings India Private Limited
(Brickwork). Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.
Objects of the Issue: The funds raised through this Issue, will be used for the purpose of onward lending, financing, and for repayment of interest and principal of existing
borrowings of the Company: minimum 75% of the net amount raised and 25% of the net amount will be used for General Corporate purpose.
Issue Terms:
Issuer
Issue

Tranche 1 Issue Size

Type of Instrument
Face Value and issue price (in Rs / NCD)
Minimum Application
Stock Exchanges for listing
Issuance
Trading
Trading Lot
Call / Put options
Rating
Security

Indiabulls Housing Finance Limited

Public Issue of Secured NCDs and Unsecured NCDs aggregating up to Rs 3500 crore with an option to retain over-subscription
up to Rs 3500 crore on for issuance of additional Secured NCDs and Unsecured NCDs aggregating up to Rs 7000 crore. The
Unsecured NCDs will be in the nature of Subordinated Debt and will be eligible for Tier II capital.
Base Issue Size of Rs. 3500 crore with an option to retain oversubscription up to Shelf Limit i.e. upto Rs. 7000 crore.
Secured and Unsecured Redeemable Non Convertible Debentures
1,000
Rs. 10,000 (10 NCDs) and in multiple of Rs. 1,000 (1 NCD) thereafter across all Series
NSE & BSE
Both physical and dematerialized form
Compulsorily in dematerialized form
1 (one) Bond
Nil
CARE AAA (Triple A)by Credit Analysis & Research Ltd (CARE) and BWR AAA by Brickwork Ratings India Private Limited
(Brickwork).
The Secured NCDs proposed to be issued will be secured by a first ranking pari passu charge on the current assets (including
investments) of the Issuer, both present and future; and on present and future loan assets of the Issuer, including all monies
receivable for the principal amount and interest thereon. The Secured NCDs will have an asset cover of one time on the
principal amount and interest thereon. The Issuer reserves the right to sell or otherwise deal with the receivables, both present
and future, including without limitation to create a charge on pari passu basis thereon for its present and future financial
requirements, without requiring the consent of, or intimation to, the Secured NCD holders or the Debenture Trustee in this
connection, provided that a minimum security cover of one time on the principal amount and interest thereon, is maintained.
No security will be created for Unsecured NCD in the nature of Subordinated Debt.

Issue Details of Secured NCDs:

IV

Series
Frequency of Interest Payment
Tenor
Coupon (%) for NCD Holders in Category I, and II
Coupon (%) for NCD Holders in Category III
Coupon (%) for NCD holders in Category IV

I
Annual
3 years
8.55%
8.65%
8.70%

II
Cumulative
3 years
NA
NA
NA

III
Annual
5 Years
8.75%
8.90%
8.90%

Cumulative
5 Years
NA
NA
NA

V
Monthly
10 Years
8.51%
8.65%
8.65%

VI
Annual
10 Years
8.85%
9.00%
9.00%

VII
Cumulative
10 Years
NA
NA
NA

Effective Yield (per annum ) Category I and II

Effective Yield (per annum ) Category III
Effective Yield (per annum ) Category IV
Redemption Amount (Rs / NCD) on Maturity for Category I & Category II
Redemption Amount (Rs / NCD) on Maturity for Category III
Redemption Amount (Rs / NCD) on Maturity for Category IV

8.55%
8.65%
8.70%
Rs 1000
Rs 1000
Rs 1000

8.55%
8.65%
8.70%
Rs 1278.47
Rs 1282.01
Rs 1283.78

8.75%
8.90%
8.90%
Rs 1000
Rs 1000
Rs 1000

8.75%
8.90%
8.90%
Rs 1521.41
Rs 1531.93
Rs 1531.93

8.85%
9.00%
9.00%
Rs 1000
Rs 1000
Rs 1000

8.85%
9.00%
9.00%
Rs 1000
Rs 1000
Rs 1000

8.85%
9.00%
9.00%
Rs 2336.07
Rs 2368.48
Rs 2368.48

Series
Frequency of Interest Payment
Tenor
Coupon (%) for NCD Holders in Category I, and II
Coupon (%) for NCD Holders in Category III & IV

I
Monthly

III
Cumulative

8.65%
8.79%

II
Annual
10 years
9.00%
9.15%

Effective Yield (per annum ) Category I and II

Effective Yield (per annum ) Category III & IV
Redemption Amount (Rs / NCD) on Maturity for Category I & Category II
Redemption Amount (Rs / NCD) on Maturity for Category III & IV

9.00%
9.15%
Rs 1000
Rs 1000

9.00%
9.15%
Rs 1000
Rs 1000

9.00%
9.15%
Rs 2368.48
Rs 2401.30

Issue Details of Secured NCDs:

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NA
NA

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Investors in the Issue who fall under Category IV and who are senior citizens on the Deemed Date of Allotment shall be eligible for additional coupon of 0.10% per annum
provided the NCDs are held by the investors on the relevant record date applicable for payment of respective coupon and/ or redemption of NCDs across all series. Senior
Citizen(s) have to provide self -attested copy of PAN as additional KYC document.
Who can apply?
Category I: (Institutional Category)
Public financial institutions, scheduled commercial banks, Indian multilateral and bilateral development financial institution which are authorised to invest in the NCDs;
Provident funds, pension funds, superannuation funds and gratuity funds, which are authorised to invest in the NCDs;
Venture Capital Funds/ Alternative Investment Fund registered with SEBI;
Insurance Companies registered with IRDA;
State industrial development corporations;
Insurance funds set up and managed by the army, navy, or air force of the Union of India;
Insurance funds set up and managed by the Department of Posts, the Union of India;
National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India; and
Mutual Funds.
Category II: (Non - Institutional Category)
Companies within the meaning of section 2(20) of the Companies Act, 2013; co-operative banks, and societies registered under the applicable laws in India and authorized
to invest in the NCDs;
Statutory Bodies/Corporations.
Regional Rural Banks
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 (No. 6 of 2009);
Association of Persons; and
Any other incorporated and/ or unincorporated body of persons
Category III: (High Net-worth Individual Portion)
Resident Indian individuals who apply for NCDs aggregating to a value more than Rs. 10 lacs, across all Series of NCDs; and
Hindu Undivided Families through the Karta who apply for NCDs aggregating to a value more than Rs. 10 lacs, across all Series of NCDs.
Category IV: (Retail Individual Investors Portion)
Resident Indian individuals who apply for NCDs aggregating to a value not more than Rs. 10 lacs, across all Series of NCDs; and
Hindu Undivided Families through the Karta who apply for NCDs aggregating to a value not more than Rs. 10 lacs, across all Series of NCDs.
Who can not apply?
The following categories of persons, and entities, shall not be eligible to participate in the Issue and any Applications from such persons and entities are liable to be rejected.

Minors without a guardian name*(A guardian may apply on behalf of a minor. However, Applications by minors must be made through Application Forms that contain the
names of both the minor Applicant and the guardian); Applicant shall ensure that guardian is competent to contract under Indian Contract Act, 1872
Foreign nationals, NRI inter-alia including any NRIs who are (i) based in the USA, and/or, (ii) domiciled in the USA, and/or, (iii) residents/citizens of the USA, and/or, (iv)
subject to any taxation laws of the USA;
Persons resident outside India and other foreign entities;
Foreign Institutional Investors;
Foreign Portfolio Investors;
Foreign Venture Capital Investors
Qualified Foreign Investors;
Overseas Corporate Bodies; and
Persons ineligible to contract under applicable statutory/regulatory requirements.

Basis of Allotment:
Applicants belonging to all three Categories will be allocated as given in the table below:
Particulars
Reservation for each Portion

Category I
20% of the Overall Issue Size

Category II
20% of the Overall Issue Size

Category III
30% of the Overall Issue Size

Category IV
30% of the Overall Issue Size

Note:
Applicants belonging to these categories will be allotted in the first instance on first come first serve basis (determined on the basis of date of upload of the Applications on the
electronic Application platform of the relevant stock exchanges). In case of an oversubscription in any of the Portions, Allotments to the maximum extent, as possible, will be

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made on a first-come first-serve basis and thereafter on proportionate basis in each portion, i.e. full Allotment of Bonds to the Applicants on a first come first basis up to the
date falling 1 (one) day prior to the date of oversubscription and proportionate allotment of Bonds to the Applicants on the date of oversubscription (based on the date of
upload of each Application on the electronic Application platform of the relevant stock exchanges, in each Portion).
Credit Rating:
The NCDs proposed to be issued under this Issue have been rated CARE AAA (Triple A) for an amount of Rs 70,000 million, by Credit Analysis & Research Ltd. (CARE) vide their
letter no. CARE/HO/RL/2016-17/2033 dated August 19, 2016, BWR AAA with stable outlook an amount of Rs 70,000 million, by Brickwork Ratings India Private Limited
(Brickwork) vide their letter no. BWR/NCD/HO/ERC/MM/0266/2016-17 dated August 18, 2016. The rating of NCDs by CARE and Brickwork indicate that instruments with this
rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk..
Interest on application Money: Indiabulls Housing Finance Ltd shall pay interest on application amount, as per the Effective Yield applicable to the relevant Series of NCD (as
per the Category of the Investor), allotted to the Applicants.
Interest on Refund: 6% per annum.
Liquidity and Exit Options: The Bonds are proposed to be listed on the NSE & BSE.
Company Background:
Indiabulls Housing Finance Ltd is one of the largest housing finance companies ("HFCs") in India. It is a non-deposit taking HFC registered with the NHB. It is also a notified
financial institution under the SARFAESI Act. The Company focus primarily on long-term secured mortgage-backed loans and offers housing loans and loans against property to
its target client base of salaried and self-employed individuals and small and medium-sized enterprises. It also offers mortgage loans to real estate developers in India in the
form of lease rental discounting for commercial premises and construction finance for the construction of residential premises. The majority of its assets under management
("AUM") comprise housing loans, including in the affordable housing segment. For the Fiscal Year 2016, its housing loans were disbursed at an average ticket size of Rs 2.5
million, with an average LTV ratio of 71% (at origination). As of March 31, 2016, Indiabulls had offices spread across over 110 locations in India and also have two representative
offices in Dubai and London to target NRI clients. Its network gives a pan-India presence across Tier I, Tier II and Tier III cities in India and allows interacting with and servicing
customers at the local level whilst ensuring that credit decisions are taken only at regional hubs in accordance with defined internal parameters and protocols. As of March 31,
2016, Indiabulls had a direct sales team of over 2,500 employees who were located across network. This sales team is instrumental in sourcing the majority of its customer and
also rely on external channels, such as direct sales agents for referring potential customers.
Indiabulls consolidated borrowings as at March 31, 2016 were Rs 610,853.1 million and its standalone borrowings as at June 30, 2016 were Rs 651,747.6 million, respectively. It
rely on long-term and medium-term borrowings from banks and other financial institutions, including external commercial borrowings, issuances of non-convertible debentures
and commercial papers. It has a diversified lender base, comprising PSU and private banks, mutual funds, insurance companies, provident funds, pension funds and other
financial institutions. It also sell down parts of its portfolio through securitization and/ or direct assignment of loan receivables to various banks, insurance companies and other
financial institutions, which is another source of liquidity for it. As at March 31, 2016, 2015, and 2014, Indiabulls consolidated gross NPAs as a percentage of its consolidated
AUM were 0.84%, 0.85% and 0.83%, respectively, and its consolidated net NPAs (which reflect gross NPAs less provisions for NPAs, except counter-cyclical provision) as a
percentage of its consolidated AUM were 0.35%, 0.36% and 0.36%, respectively. As of March 31, 2016, 2015 and 2014, its standalone capital to risk (weighted) assets ratio
("CRAR") was 20.51%, 18.35% and 19.14%, respectively
For the Fiscal Years 2016, 2015 and 2014, consolidated revenue from operations was Rs 82,899.3 million, Rs 64,493.0 million and Rs 54,064.0 million, respectively, and its
consolidated profit after tax before share of profit attributable to minority interest was Rs 23,447.5 million, Rs 19,012.4 million and Rs 15,685.4 million respectively.
Consolidated revenue from operations and consolidated profit after tax grew at a CAGR of 23.8% and 22.3%, respectively, from Fiscal Year 2014 to Fiscal Year 2016. Standalone
revenue from operations increased by Rs 5,502.0 million, from Rs 17,573.4 million for the three months ended June 30, 2015 to Rs 23,075.4 million for the three months ended
June 30, 2016. Its standalone profit after tax increased by Rs 1,271.1 million, from Rs 4,993.6 million for the three months ended June 30, 2015 to Rs 6,264.8 million for the
three months ended June 30, 2016.
Financial Performance:
(Rs Million)

Parameters
Net worth
Total Debt
of which Non Current Maturities of Long Term Borrowing
Short Term Borrowing
Current Maturities of Long Term Borrowing
Net Fixed Assets
Non Current Assets (Excluding Fixed Assets)
Cash and Cash Equivalents
Current Investments
Current Assets ( Excluding Cash and Cash Equivalent & Current Investments)
Current Liabilities ( Excluding Short term borrowing , Current Maturities of Long Term Borrowing)
Non Current Liabilities
Assets Under Management
Interest Income (Including Treasury Income)
Interest Expenses
Provisioning & Write-offs
Profit After Tax
Gross NPA (%)

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Fiscal 2016
106,267.8
6,10,853.2
355,212.6
143,108.2
112,532.4
685.6
546,666.7
29,017.0
99,685.2
87,633.9
37,409.3
9,158.2
686,825.5
87,649.8
49,714.3
5,068.6
23,447.5
0.8

Fiscal 2015
65,651.8
4,74,874.5
291,054.5
118,614.8
65,205.2
541.3
411,191.1
34,902.9
61,408.6
63,582.4
23,896.4
7,203.6
522,350.3
69,115.7
39,442.0
3,002.7
19,012.4
0.8

Fiscal 2014
56,388.6
3,55,395.2
201,655.2
91,474.0
62,266.0
469.1
320,549.3
44,190.4
29,223.4
49,051.5
28,013.9
3,686.1
411,694.0
56,568.2
32,823.8
2,297.4
15,685.4
0.8

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Net NPA (%)*
Tier I Capital Adequacy Ratio (%)
Tier II Capital Adequacy Ratio (%)

0.3
17.9%
2.7%

0.4
15.2%
3.1%

0.4
15.1%
4.1%

Competitive Strengths:
One of the largest HFCs in India with strong financial performance, capitalization and credit ratings
Access to diversified and cost effective funding sources
Strong network and pan-India presence and brand
Prudent credit and information technology policies and processes leading to improved asset quality
Technology advancements aimed at increasing customer accessibility
Experienced Board of Directors and senior management team
Strategy:
Continue expansion by focusing on housing loans and affordable housing segment
Grow loan book through technological endeavours
Leverage financial strength and improved ratings to increase competitiveness, diversify funding mix and reduce funding costs
Continue to maintain adequate liquidity
Continue to maintain prudent risk management policies for assets under management
Expand physical and online networks and leverage digital media
Risks & Concerns:
Indiabulls business has been growing consistently in the past. Any inability to manage and maintain growth effectively may have a material adverse effect on the business,
results of operations and financial condition.
It is vulnerable to the volatility in interest rates and may face interest rate and maturity mismatches between assets and liabilities in the future which may cause liquidity
issues.
Any increase in the levels of NPAs in AUM, for any reason whatsoever, would adversely affect the business, results of operations and financial condition.
Indebtedness and conditions and restrictions imposed by financing arrangements could adversely affect the ability to conduct business and operations.
Indiabulls is party to certain legal proceedings and any adverse outcome in these or other proceedings may adversely affect the business.
Any downgrade in credit ratings may increase interest rates for refinancing its outstanding debt, which would increase financing costs, and adversely affect future
issuances of debt and ability to borrow on a competitive basis.
Indiabulls is a listed HFC and subject to various regulatory and legal requirements. Also, future regulatory changes may have a material adverse effect on the business,
results of operations and financial condition.
Inability to obtain, renew or maintain statutory and regulatory permits and approvals required to operate business may materially and adversely affect the business and
results of operations.
It cannot be assure you that Indiabulls will be able to successfully execute growth strategies, which could affect the operations, results, financial condition and cash flows
As a HFC, Indiabulls has significant exposure to the real estate sector and any negative events affecting this sector could adversely affect the business and result of
operations
Indiabulls ability to pay dividends in the future will depend upon earnings, financial condition, cash flows and capital requirements.
Indiabulls may not be able to secure the requisite amount of financing at competitive rates for its growth plans, which could adversely affect the business, financial
condition and results of operations.
Indiabulls has contingent liabilities as at March 31, 2016 and its financial condition may be adversely affected if these contingent liabilities materialize.
Business and operations significantly depend on senior management and key employees and may be adversely affected if it is unable to retain them.
Business is dependent on relationships with clients established through, amongst others, branches. Closure of branches or loss of key branch personnel may lead to
damage to these relationships and a decline in revenue and profits.
Certain of Indiabulls subsidiaries have incurred losses in the past and may be unable to achieve or sustain profitability in the future, which may adversely affect the
business, financial condition and results of operations.
Depend on the accuracy and completeness of information provided by potential borrowers. Its reliance on any misleading information given by potential borrowers may
affect judgment of credit worthiness of potential borrowers, and the value of and title to the collateral, which may affect the business, results of operations and financial
condition.
The growth rate of India's housing finance industry may not be sustainable
The Indian housing finance industry is competitive and increasing competition may result in declining margins if the Company is unable to compete effectively, which may
adversely affect the Companys business, prospects, financial condition and results of operations.
Entered into a number of related party transactions and may continue to enter into related party transactions, which may involve conflicts of interest.
Indiabulls is subject to risks arising from exchange rate fluctuations, which could materially and adversely affect the business and financial conditions
A slowdown in economic growth in India may adversely affect business and results of operations.
The growth rate of Indias housing finance industry may not be sustainable
Business and activities may be affected by competition law in India
Financial instability in other countries may cause increased volatility in Indian financial markets.

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RETAIL RESEARCH Fax: (022) 30753435 Corporate Office, HDFC Securities Limited, I Think Techno Campus, Bulding B, Alpha, Office Floor 8, Near Kanjurmarg Station Opp. Crompton Greaves, Kanjurmarg
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Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. HDFC Securities Limited is one of the lead brokers to the issue and will earn
fees for its services.This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitati on to buy any security. The information contained
herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities
referred to herein. We may from time to time solicit from, or perform investment banking, or other services for, any company mentioned in this document. This report is intended for Non-institutional Clients only.
Disclaimer: HDFC Bank (a shareholder in HDFC Securities Ltd) is associated with this issue in the capacity of one of the Bankers to the i ssue and will earn fees for its services. This report is prepared in the normal
course, solely upon information generally available to the public. No representation is made that it is accurate or complete notwithstanding that HDFC Bank is acting for Indiabulls Housing Finance Ltd. This report is not
issued with the authority of Indiabulls Housing Finance Ltd. Readers of this report are advised to take an informed decision on the issue after independent verification and analysis.

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