Piramal Capital NCD Tranche-I issue review (May apply)

This is the maiden debt offer from Piramal group housing finance company.
The company has posted inconsistency in financial performance for last three fiscals.
This debt offer is rated CARE/AA (CWD) and ICRA/AA (outlook negative).
Coupon rates ranging from 8.10% to 9.00% with annual or cumulative payment mode.

ABOUT COMPANY:

Piramal Capital & Housing Finance Ltd. (PCHFL) is a wholly owned subsidiary of Piramal Enterprises Limited ('PEL') which is the flagship company of the Piramal Group. It is registered as a non-deposit taking housing finance company with the National Housing Bank (NHB) and is engaged in various financial services businesses. PCHFL provides both wholesale funding opportunities to real estate developers, corporates and SMEs across sectors and retail funding opportunities including housing finance to individual customers.

In addition to wholesale lending its business also focuses on retail lending with a differentiated approach towards risk optimized profitability. Under retail lending the company offers housing finance, LAP, secured business loans, digital purchase finance and digital personal loans. It provides financing in the housing industry to existing home owners and new home buyers. The company also provides construction finance for residential and commercial projects, and financing to large and mid-sized corporate clients. In real estate, the platform provides financing solutions such as structured debt, construction finance and lease rental discounting to developers and housing finance to home buyers.

The wholesale business in non-real estate sector includes separate verticals for the corporate finance group ('CFG') and emerging corporate lending ('ECL'). CFG provides customized funding solutions to companies across sectors such as infrastructure, renewable energy, industrials, and auto components, while ECL focuses on providing lending services to Small and Medium Enterprises ('SME(s)').

As on March 31, 2021, it had 17 permanent branches located in various cities across India. The company has a 'hub-and-spoke' model, with physical branches serving as its hub locations and technology-led spoke locations. Its AUM as of March 31, 2021 stood at Rs. 32353.56 cr. Its retail housing portfolio grew from 4% in fiscal 2018 to 13.7% in fiscal 2021 of its overall loan book.

The housing finance industry in India is highly competitive. PCHFL faces competition from domestic and international banks as well as other HFCs for corporate advances and housing loans. Since it has mix of wholesale and retail loans, its primary competition is with other NBFCs and HFCs offering similar products and services.

ISSUE DETAILS:

The company is coming out with a maiden debt offer of secured, rated, listed, redeemable non-convertible debentures of face value of Rs. 1000 each for an amount of Rs. 200 cr. with an option to retain oversubscription up to Rs. 800 cr., thus making the overall issue size of Rs. 1000 cr. under Tranche-1. It has a shelf limit of Rs. 2000 cr. This debt offer opens for subscription on July 12, 2021, and will close on or before July 23, 2021. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000.00) and in multiple of 1 NCD (i.e. Rs. 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE and NSE.

PCHFL will be spending Rs. 10.28 cr. for mobilizing Rs. 1000 crore of debt fund. From the net proceeds, it will use at least 75%for the purpose of onward lending, financing and for repayment/prepayment of interest and principal of existing borrowings and up to 25% for general corporate purpose.

This debt offer is jointly lead managed by A K Capital Services Ltd., Edelweiss Financial Services Ltd., JM Financial Ltd., Trust Investment Advisors Pvt. Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. IDBI Trusteeship Services Ltd. is the debenture trustee.

This debt offer has tenure of 26 months, 36 months, 60 months and 120 months and is offering coupon rates ranging from 8.10% to 9.00%. It offers interest payment on annual and cumulative basis as per the scheme preferred by investors. It has allocated 10% for Institutions, 10% for non-institutions, 40% for HNIs and 40% for retail investors.

This offer is rated CARE/AA (CWD) by CARE Ratings Ltd. and ICRA/AA (outlook Negative) by ICRA Ltd. CARE rating is on the basis of CWD i.e. Under Credit Watch with Developing implications. Both these ratings may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating.

FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, PCHFL has posted total income/net profit of Rs. 5571.86 cr. / Rs. 1442.58 cr. (FAY19), Rs. 5622.61 cr. / Rs. 32.46 cr. (FY20) and Rs. 5087.90 cr. / Rs. 1034.44 cr. (FY21). This shows inconsistency in its top and bottom lines for all these three fiscals.

As of March 31, 2021, its net NPA stood at 1.90% against 0.14% as of March 31, 2019. Its current debt equity ratio of 1.39 (as of March 31, 2021) will stand enhanced to 1.48 post this issue.

Conclusion / Investment Strategy

This being the maiden debt offer from Piramal group may be lapped up by investors. It has AA rating with a caution (CWD and Negative outlook) and coupon rates are average compared to ongoing few other debt offers. Cash surplus, risk savvy investors may consider investment at their own risk in this debt offer.

Review By Dilip Davda on July 4, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The Piramal Capital NCD July 2021 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Piramal Capital NCD July 2021 worth investing. The Piramal Capital NCD July 2021 Note sets the NCD expectations in systematic way which tells you if Piramal Capital NCD July 2021 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Piramal Capital NCD July 2021 by providing NCD recommendations i.e. subscribe, avoid and neutral.

Piramal Capital NCD Tranche-I issue review (May apply)

Conclusion / Investment Strategy

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