IIFL Samasta to Raise ₹1,000 Crore through Bonds; Here's the Info!

About IIFL Samasta Finance Ltd business model

Companies in the financial sector need to continuously raise funds through equity and debt to spruce up their Tier-1 and Tier-2 capital as well as to have enough resources to on-lend to their customers. IIFL Samasta Finance Ltd is a wholly owned subsidiary of IIFL Finance Ltd; which is part of the IIFL group. The IIFL group is one of India’s leading diversified financial services group with businesses encompassing home loans, gold loans, microfinance, wealth management, asset management, financial advisory, investment banking and stock broking. IIFL Samasta Finance Ltd is in the business of giving micro loans to individuals, essentially to empower and enable people to earn their livelihood. The focus segment of IIFL Samasta is the borrowers at the bottom of the pyramid, who do not generally have access to traditional sources of finance, which are based on documented payment records and credit history.

IIFL Samasta Finance Ltd is a systemically important NBFC and in terms of its granular business model, it is classified as a NBFC-MFI. Its innovative financial lending products are targeted at women borrowers belonging to the underbanked sections of society and include categories like households, industrial workers, flower vendors, cloth traders, tailors, craftsmen etc from the rural and semi-urban segments of India. IIFL Samasta also provides value-added financial services to this segment like insurance services, financial advisory services etc. As of September 2023, IIFL Samasta had assets under management (AUM) of ₹12,196 crore. It operates through a network of 1,485 branches across 21 Indian states.

Highlights of the IIFL Samasta NCD Issue

IIFL Samasta is raising ₹1,000 crore (including greenshoe option) from the public via the issue of secured redeemable non-convertible debentures (NCDs). Here are some of the major highlights of the NCD issue of IIFL Samasta Finance Ltd.

• The NCD issue of IIFL Samasta Finance Ltd has opened on 04th December 2023 and will close for subscription on 15th December 2023. However, the company reserves the right to close the NCD issue earlier, based on the response to the issue.
   
• The base size of the issue of secured redeemable NCDs will be ₹200 crore. However, there is also a greenshoe option (option to retain additional subscription) of ₹800 crore, thus taking the maximum NCD offer size to ₹1,000 crore overall.
   
• The face value (FV) of the NCD will be ₹1,000 per NCD and the minimum investment for retail investors is 10 NCDs entailing a minimum investment of ₹10,000. These NCDs will be redeemed at the face value.
   
• NCDs have to mandatorily credit rated. The secured redeemable NCD of IIFL Samasta Finance Ltd has been assigned rating of “CRISIL AA-/Positive” by CRISIL and “ACUITE AA/Stable” by Acuite Ratings and Research Ltd. This indicates substantial safety with respect servicing of interest on time and the safety of the principal amount.
   
• Allotment of NCDs will be on a first-come-first-serve basis up to the day prior to the NCD issue getting oversubscribed. Subsequently, the NCD allocation will be on a proportionate basis only. While the NCD issue is open technically till 15th December 2023, the company does reserve the right to close the issue earlier.
   
• The NCDs of IIFL Samasta Finance Ltd will be listed on the BSE and the NSE and they can be traded subject to available of liquidity in the market. The NCDs will be issue compulsorily in demat form and they would also be traded mandatorily in demat mode only. It can be held in existing NSDL and CDSL depository accounts of the investors.
   
• For the NCD issue, Link Intime India Private Ltd will act as the registrars to the issue for maintaining the records of the NCD holders. Beacon Trusteeship Ltd act as the debenture trustee to the NCD issue of IIFL Samasta Finance Ltd, taking care of and representing the interests of the debenture holders. The NCD issue is being lead managed by JM Financial, IIFL Securities, Nuvama Wealth Management and Trust Investment Advisors.

One of the big attractions of the NCD issue by IIFL Samasta Finance Ltd is the attractive yields on these debentures.

Explore IIFL Samasta Finance NCDs with Mr. Venkatesh N:

How much can investors earn on these NCDs?

Yields on the NCD of IIFL Samasta Finance Ltd are attractive and well above what investors can get on deposits with banks. Here is a quick capsule of the schemes available under the NCD issue and the interest rate on each of these schemes.

Here are some of the key takeaways with respect to the yields on the NCD, which investors must familiarize themselves with before investing.

• The NCDs are available in 3 tenors of 24 months, 36 months, and 60 months. All these three tenures offer investors the option to get the interest paid either monthly or annually.
   
• Needless to say, the coupon rate on the monthly interest payout plan will be lower than the annual payout plan for all the tenures to ensure that the overall yield to maturity (YTM) for each of the specific maturities are aligned.
   
• The coupon rates range from 9.21% at the lower end to 10.50% at the upper end while the effective yield to maturity (YTM) will range from 9.59% to 10.49%. The interest payout will be direct credit to the bank mandate linked to the demat account where the NCDs of IIFL Samasta Ltd are held.

To sum it up, the IIFL Samasta Finance Ltd NCDs offer investors an opportunity to invest in a steady and stable investment instrument offering above market yields. In a scenario, where the RBI has already hiked the repo rates by 250 basis points since March 2022, this instrument offers investors an opportunity to lock in funds at higher yields.

Frequently asked questions on the IIFL Samasta Finance Ltd NCD

Q1 – How will the interest and capital gains on the NCDs be taxed?

A1 – There is no question of capital gains on the regular issue and redemption of NCDs as they will be issued and redeemed at par. However, any capital gain on NCDs purchased in the secondary market will be taxed as non-equity capital gains. That means if the NCDs are held for more than one year, it will be long term capital gains and if less than 1 year it will short term capital gains, as per the special definition for listed bonds / NCDs. While short term capital gains will be taxed at the peak incremental rate of the investor, the long term capital gains will be taxed at 20% of the indexed capital gains.

Q2 – Is there any reservation for retail investors, HNI and institutions in the NCD issue?

A2 – The table below captures the allocation percentage to each of these categories of investors.

Based on the above, the investor can find out which category they belong to.

Q3 – Can I make NCD applications using UPI facility?

A3 – Yes, UPI investments in the NCD can be made up to Rs5 lakh outer limit (the maximum transaction limit prescribed by UPI) and must be necessarily an ASBA (applications supported by blocked amounts) only.

Q4 – Do these NCD investments carry risk?

A4 – By default, all investments carry risk and it is best to consult your financial advisor about how it fits into your financial plan. However, it is pertinent to mention that the credit rating assigned to the instrument by CRISIL and Acuite indicates high degree of safety with respect to timely servicing of financial obligations and indicate very low credit risk.

Q5 – What happens if I forget to indicate my specific tenure / payout choice. Will the application get rejected?

A5 – No, the application does not get rejected. In case, the investor has not opted for any plan, the default choice will be Plan III as shown in the table. That is a 36-month NCD with monthly interest payout.