Reliance Home Finance Ltd: NCD Analysis

Updated on 06-01-2017

6-01-2017- Reliance Home Finance Ltd (RHPL) AA+ NCDs gets listed on bourses. The Unsecured 9.4% NCD NSE – RHPL N6, BSE- 935916, ISIN  INE217K08289 closes the day at 983-984 giving YTM of over 9.6%.

Reliance Home Finance Limited is coming with Secured and Unsecured Redeemable Non-Convertible Debentures (NCD) of worth Rs 3,500 crore issue;

Reliance Home Finance Limited is coming with Secured and Unsecured Redeemable Non-Convertible Debentures (NCD) of worth Rs 3,500 crore issue. Reliance Home Finance Limited  NCD is the first public NCD issue from the group.

  • Issue Date: Thursday, 22nd December 2016 to Friday, 6th January 2017
  • Issue Size:Secured redeemable NCDs aggregating up to Rs.3,000 Crores and un-secured redeemable NCDs aggregating up to Rs.500 crores, totaling up to Rs.3,500 crore
  • Lead Managers: Financial Services Limited, Axis Bank Limited, AK Capital Services Limited, YES Securities (India) Limited ,Ind Trust Investment Advisors Private Limited.
  •  Rating:AA+” (Outlook:Stable) by CARE, and Brickworks

About the company: 

RHFL’s product offering includes Home Loans, Loan Against Property and Construction Finance. Asset Under Management (AUM) has increased from`5,771 Crores as of Mach 31,2015 to `7,357 Crores as of Mach 31, 2016 which is 27% increment y-o-y, with loan disbursement of `3,922 Crores during FY16. The Company has also undertaken securitization of its mortgage book, and the outstanding securitized portfolio amounted to `566 Crores as of March 31, 2016. As per audited financial statements for FY16 of RHFL, Total Operating Income stood at` 796 Crores compared to` 501 Crores for FY15, a y-o-y growth of ~59%, while Net Income from Operations increased from ` 184 Crores to ` 260 Crores, a growth of ~41%. Net Interest Margin (NIM) was 4.4% for FY16. The Company reported PAT of `87Crores in FY16 compared to `69 Crores in FY15.

Reliance Home Finance Ltd revenue from operations has grown at a CAGR of 17.46% from fiscal 2012 to 2016 and our net profit before tax grew at a CAGR of 26.81% during the same period.

Capital Adequacy: Tangible Net worth of the Company has increased from ` 533 Crores as of March 31, 2015 to ` 620 Crores as of March 31, 2016 due to retained profit for the financial year. It has a healthy capital adequacy with Total CRAR at around 16.34% (15.17% as of FY15 end), which is well above the NHB’s minimum stipulated requirement of 12%. Tier I CRAR was at 10.51% (11.10% as of FY15 end).

Asset Quality: Reliance Home Finance Ltd Asset quality in tems of Gross NPA as a percentage of Loan Portfolio Outstanding was at 0.9% as of March 31, 2016 compared to 0.9% as of March 31, 2015. Net NPA was at 0.7% compared to 0.8%. Provisioning for the sub-standard assets are done as per the guidelines of  NHB and Provision Coverage Ratio was 23.64%. NPAs as a percentage of outstanding loans were 1.18% for the HY ended September 30, 2016 showing a small increase.

respectively. Our revenue from operations has grown at a CAGR of 17.46% from fiscal 2012 to 2016 and our net profit before tax grew at a CAGR of 26.81% during the same period.

Reliance Home Finance NCD Issue Details:

Category Allocation
Category I –Institutional(QIB) II – Non Institutional III –  HNI IV – Retail upto 10 Lacs
% of Issue Size 30% 10% 30% 30%
Amount in Rs. Crore 1,050 350 1,050 1,050
Option/Series I II III IV
Nature of NCDs Secured Unsecured
Who can Apply All categories of investors (Category I, II, III and IV)
Issue Price per NCD Rs.1,000/- Rs.1,000/- Rs.1,000/- Rs.1,000/-
Frequency of Interest Annual Annual Annual Annual
Tenor 3 Years 5 Years 10 Years 15 Years
Put/Call Option NA NA Call option after 10 yrs
 Yield (% p.a.) :
Category I & II 8.70% 8.90% 9.00% 9.25%*
Category III & IV 8.90% 9.05% 9.15% 9.40%*
* In the event the company does not exercise the call option, a step-up of 25 bps above coupon after 10 years from Deemed Date of Allotment shall be payable on every subsequent coupon payment date.

Comparison of NCD offer with other Listed NCDs

Coupon Rate 10 9.15 9.25 9.3 9
No. of years 10 10 7 10 10
Interest Frequency Annual Annual Annual Annual Annual
FV 1000 1000 1000 1000 1000
FV  with accrued interest 1041.1 1020.31 1024.79 1031.06 1047.61
Current Market Price 1068.97 1,014.00 1,011.02 1,018.25 1089.72
Traded Date 16-12-2016 16-12-2016 16-12-2016 16-12-2016 16-12-2016
YTM 9.58% 9.24% 9.52% 9.49% 8.38%
ISIN INE530L07228 INE148I08256 INE202B07IO3 INE202B07HV0 INE774D08MA6
BSE Code 935788 935868, 935840 935814 935752
Security  ID 10EHFL26 930DHFL26B 925DHFL23B 930DHFL26B 9MMFSL26
Issue Dt 19-07-2016 26-09-2016 09-09-2016 16-08-2016 06-Jun-16
interest due date 19-07-2017 26-09-2017 09-09-2017 16-08-2017 06-Jun-17
Redemption  date 19-07-2026 26-09-2026 09-09-2023 16-08-2026 06-Jun-26


This table indicates that out of  recent public NCD issues of similar companies while 10% EHFL(AA rated) & 9% Mahindra Finance NCDs (AAA) have yielded good capital appreciation, that of other housing finance companies are quoting below their intrinsic value ( Issue price + Accrued Interest)


  • Post Demonetization, the  Housing Finance companies are in a state of flux and the issue is coming in these rather turbulent times. The Bonds are rated AAA, which ensure a high degree of safety.
  • Past NCD Public issue by were  a success and saw huge subscriptions. However based on present market prices commanded by these NCDs, such chances seem less.
  • Other non-banking finance companies that are likely to raise money in January 2017 include Muthoot Finance, Srei Equipment Finance, IL&FS Transportation.
  • Given the issue size reasonable  liquidity can be  expected.
  • The best interest options stands at 9.40% for 15 years on unsecured NCDs even as there is a call option after 10 years.
  • Suitable only for investors in zero or low tax bracket  & those willing to take some degree of risk
  • Apart from credit ratings, Valuation is also large;y determined by trust investors enjoy in  the group or company issuing the bond. A pointer in this case is that  Mahindar Finance even with average financials compared to Indiabull Housing Finance,  DHFL and same AAA rating  is commanding much better valuation in the market with its YTM standing at around 8.4% compared  to YTM above 9.2% for  DHFL, Indiabulls Housing Finance.
  • Except for benefiting from upfront brokerage, chances of making easy money in these type of NCD issues have gone down considerably as Bond yields which were earlier falling down continuously have shown signs of stabilization and even reversed to some extent.
  • In the past investors made a beeline for such NCD issues as with substantial upfront brokerage (1%)  and near par or above par listing large investors made some short term capital gains from these issues. These prospects are not very bright now, but a downward revision of Interest rates and stability in market post Demonetization could add some zing the NCD  prices at a later date.
  • Overall keeping in view the group (Reliance) involved and limited other investment options at this interest rate, small Investors looking for fixed income can take a small exposure to the NCD.

Leave a Reply