DHFL (Deewan Housing Finance Ltd) is Third Largest Home Loan & Housing Finance Company in India. The company has come out with its first public issue of non-convertible debentures (NCD) offering up to 9.3% interest rate. The issue would open on August 3 and would close on August 16, 2016.
DHFL NCD – Significant Points:
- Offer Period: August 3 to 16, 2016
- Annual Interest Rates for Retail Investors: 8.83% to 9.30% depending on tenure
- Price of each bond: Rs 1,000
- Minimum Investment: 10 Bonds (Rs 10,000)
- Max Investment Limit for Retail Investor: Rs 10 Lakhs
- Credit Rating: “CARE AAA” by CARE & “BWR AAA” by Brickwork
- NCD Size: Rs 1,000 crore with option to retain oversubscription of Rs 4,000 crore
- Allotment: First Come First Serve
- Listing: Bonds would be listed on BSE & NSE and will entail capital gains tax on exit through secondary market
Also Read – Know NCD – Investment Tips, TDS and Taxation
DHFL NCD – Investment Options:
There are 10 options of investment in DHFL Ltd NCD. The interest rates below are only for Retail/HNI/HUF investors (Category III & IV) as referred below.
Option X – CPI Linked
DHFL is the first company to come out with CPI (Consumer Price Index) linked coupon rate. CPI captures the inflation and is declared by Government of India. Option X coupon rate is CPI + 4.18%.
This is good option if you think the inflation is on the rise for next 2 years. However the coupon rate is floored at 8.9% and capped at 9.5%.
DHFL NCD – Who can Apply?
This issue is open to all Indian residents, HUFs and Institutions.
- Category I – QIB Portion – 20% of the issue is reserved
- Category II – Corporate Portion – 20% of the issue is reserved
- Category III – HNI Portion – 30% of the issue is reserved (Individuals/ HUFs Application of more than Rs 10 lakhs)
- Category Iv – Retail Portion – 30% of the issue is reserved
Why you should invest?
- AAA Credit rating means negligible likely hood of credit default
- The interest rates are almost 2% higher than regular bank FDs
- The company is doing well in last few years with consistent profits.
- This is secured NCD
Why you should not invest?
- In case the property market remains subdued for longer time, the home loan business can suffer. This might lead to rise in NPAs and lower the rating of DHFL.
- Early exit might not give you the right privce as the liquidity on exchanges for NCDs are low. So invest only if you can hold till maturity.
Also Read: Highest Interest Rate on Recurring Deposits
How to Apply?
If you have Demat account apply through ASBA facility provided by banks. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work.
In case you don’t have Demat Account, you can download the application form from company site or Financial Institutions and submit to collection centers.
- DHFL NCD is AAA rated with attractive interest rate, so the recommendation is to invest good part of your Fixed Income investment in this NCD Issue
- You should always have diversified portfolio be it fixed deposit, NCD or equity investment
- Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value
If you plan to invest in this issue, do it early as most NCD issues are over-subscribed before the end date.