A Review of NIDO Home Finance Limited’s Bond Public Issue
NIDO Home Finance Limited (formerly known as Edelweiss Housing Finance Limited) has come up with a Senior Secured, Rated, Listed, Redeemable Non-Convertible Debenture from September 18, 2024, to October 01, 2024, which holds a credit rating of A+/Watch Negative by CRISIL. This blog provides details about the company’s background and its financial performance and about the current bond public issue. The details of the NCD are given below.
Issue Highlights
Issuer Name
NIDO Home Finance Ltd.
Nature of Instrument
Senior Secured Rated Listed Redeemable Non-Convertible Debentures
Rating
A+/Watch Negative by CRISIL
Seniority
Senior Secured
Face Value
Rs. 1,000 per NCD
Base Issue Size
Rs.500 million
Option to retain oversubscription
Rs. 500 million
Coupon
Up to 11.00%
Tenor
24/36/60/120 months
Issue Date
September 18, 2024, to October 01, 2024
Terms of the issue
Company Profile
NIDO Home Finance Ltd. is a non-deposit-taking housing finance company. It is registered with the National Housing Bank and provides small ticket-size home loans. It is part of the Edelweiss Group, one of India’s leading diversified financial services groups.
As of June 2024, the company’s pan-India network spans a total of 67 offices in 67 cities in India supported by 679 employees.
The company’s AUM amounted to Rupees 32,264.50 million as of June 30, 2024.
As of June 30, 2024, the company’s Promoters Edelweiss Financial Services Limited, Edelweiss Rural and Corporate Services Limited, and Edel Finance Company Limited hold 5.00%, 55.23%, and 29.77% of paid-up share capital, respectively.
The company’s portfolio of loan products includes:
Housing Loans
Non- Housing Loans including LAP
Construction Finance
Classification of loans/advances given as of March 31, 2024
Type of Loans
Percentage ( %)
Secured
99.86
Unsecured
0.14
Performance Highlights of NIDO Home Finance Ltd. for the quarter ended June 30, 2024 (Rs. in million)
Key Operational and Financial Parameters (Rs in million)
Particulars
FY2024
FY2023
FY2022
AUM
31,044.05
30,692.05
31,448.72
Total Income
4,657.12
4,446.85
5,139.10
Profit after tax for the year
193.05
160.63
138.07
Net Worth
8,147.88
7,944.68
7,776.32
% Stage 3 Loans on Loans (Principal Amount)
1.49%
1.75%
1.83%
% Net Stage 3 Loans on Loans (Principal Amount)
0.98%
1.29%
1.28%
Tier I Capital Adequacy Ratio (%)
39.05%
32.06%
28.28%
Strengths
Established brand and corporate lineage
Nido Home Finance Ltd. is a part of the Edelweiss Group, a well-recognized financial services organization in India. By capitalizing on the existing relationships and synergies with the Group, the company focuses on expanding its loan book, introducing new products, and achieving greater heights. The relationships that Edelweiss Group has developed also help in cross-selling their products through customer reference.
Pan India Distribution Network
As of June 30, 2024, the company’s pan-India network spanned across 67 offices in 67 major cities with a retail customer base of approximately 20,173. This extensive reach enables increased profitability and return on equity (ROE) based on an increased scale of business.
Availability of a wide range of cost-effective funding sources
The company meets its funding requirements through credit facilities from banks and the NHB, as well as by issuing redeemable non-convertible debentures via private placements or public issuances. The total borrowings were ₹ ₹17,507.18 million as of June 30, 2024. The average cost for borrowing for the quarter ended June 30, 2024, was 10.32%.
The company operates under an HFC license which is subject to capital-to-risk assets ratio (CRAR) requirements as per NHB/RBI. The minimum regulatory CRAR as of on and before March 31, 2024, was 15% and it maintained 35.99% as of June 30, 2024.
A diversified credit profile, coupled with strong credit evaluation and risk management systems.
The company launched its credit business 13 years ago with retail credit products and has since diversified its portfolio. Home loans form the largest part of its credit book which lowers risk, helps mitigate concentration risk, and enhances overall risk management.
Experienced leadership and organizational culture
The company’s senior management has extensive experience in banking and financial services, with each product line supported by a dedicated team of managers. As of June 30, 2024, the team comprises 679 skilled employees who have an in-depth understanding of the industry.
Source: Information Memorandum
Overview of Housing Finance Companies
Housing Finance Companies offer an alternative financing source to the real estate and housing sectors. They play a crucial role in India’s financial system by providing home loans and creating opportunities for businesses and developers to monetize their real estate assets.
HFCs share in Housing Finance
Housing finance represents over 70% of the loan book for housing finance companies (HFCs). As of FY24, the total housing loan portfolio of HFCs is projected to have reached Rs. 5.7 lakh crores, although growth may have slowed due to the high base set in FY23.
Key Differences between a Non-Banking Financial Company (NBFC) and a Housing Finance Company (HFC)
A Non-Banking Financial Company (NBFC) is an entity which is registered under the Companies Act, of 1956. Their primary focus is on providing loans and advances but does not offer traditional banking services like deposit acceptance, fund transfers, etc.
Housing Finance Companies (HFCs) are corporate entities and are a part of NBFCs that operate under the Companies Act of 1956 but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions. They provide housing loans or finance through various direct or indirect means. HFCs were initially regulated by the National Housing Bank (NHB), but the responsibility of handling HFCs was transferred to the Reserve Bank of India (RBI) in 2019 though some regulatory powers remain with the NHB.
An HFC is an NBFC that offers home loans just like traditional banks. HFCs have contributed to the rising demand for housing loans, providing credit access to different income groups.
Why should you invest in Housing Finance Companies?
In India, home loans are offered by banks, NBFCs, and home finance companies. According to CMI Team research, the Indian Housing Finance Market is projected to grow at a compound annual growth rate (CAGR) of 24.1% from 2024 to 2033, with a market valuation reaching USD 2,669.39 billion by 2033.
Investing in Housing Finance Companies (HFCs) is promising due to their increasing role in India’s housing sector, previously dominated by banks. Their flexible lending practices such as streamlined processes have made it easier and faster to obtain a loan.
Moreover, HFCs tend to be more lenient with lower credit scores, thereby providing home loans to individuals with less-than-perfect credit histories and struggling to secure loans from traditional banks.
Driven by their flexible lending practices, HFCs are set to benefit from a booming market.
Investor Categories
The investor categories in a bond public issue are the different types of investors who are eligible to participate in the offering. The issuer allocates the ratio according to the guidelines set by regulatory bodies such as SEBI for distributing the existing bonds among these investor categories. The allocation ratio for the Nido Home Finance Limited Public Issue across the different types of investor categories is given below.
Category I- Institutional Portion- 10% of the overall issue size- Public Financial Institutions, Insurance companies, Scheduled Banks, Provident Funds, AIFs, etc.
Category II– Non-institutional Investors- 10% of the overall issue size- Companies, Co-operative Banks, Trusts, Partnership Firms, Association of Persons, etc.
Category III– High Net-worth Individual Investors- 40% of the overall issue size- Resident Indian individuals or Hindu Undivided Families through the Karta applying for an amount aggregating to above Rs. 10,00,000 across all options of NCDs in the Issue.
Category IV– Retail- 40% of the overall issue size- Resident Indian Individuals or Hindu Undivided Families through Karta applying for an amount aggregating up to and including Rs. 10,00,000.
Information Memorandum:
An Information Memorandum (IM) can be defined as a comprehensive document containing detailed information about the bond public issue. It gives insights into the issuer’s business, financial background, management team, details of offerings, associated investment risks, and fund allocation from the issue, along with regulatory and legal disclosures.
The link to the Information Memorandum of bond public issue of Nido Home Finance Limited is given below:
https://www.thefixedincome.com/storage/bondprimary_imfiles/1726221977NIDO.pdf
How to Apply through TheFixedIncome.com?
Apply easily using the following three steps:
Conclusion
In conclusion, the bond public issue by NIDO Home Finance Limited offers an attractive opportunity for those investors interested in investing in Secured Rated Listed Redeemable Non-Convertible Debentures. Investors can take part in this offering and reap the benefits associated with it. It is recommended that investors go through the Information Memorandum (IM) thoroughly and take into account their risk appetite and investment objectives before making a decision.
Disclaimer: This article is based on publicly available information and other sources believed to be reliable. The information provided in this article is intended for general, educational, and awareness purposes only and should not be considered a comprehensive disclosure of every material fact. It should not be interpreted as investment advice for any individual or entity. The article makes no guarantees regarding the completeness or accuracy of the information and disclaims all liabilities, losses, and damages arising from the use of this information. Investments in debt securities/ municipal debt securities/securitized debt instruments are subject to risks including delay and/ or default in payment. Read all the offer-related documents carefully.
