IIFL Samasta Finance Limited- An Analysis of Bond Public Issue

IIFL Samasta Finance Limited is issuing Secured, Rated, Listed, Redeemable Non-Convertible Debentures from June 03, 2024, to June 14, 2024, which holds a credit rating of CRISIL AA-/ Watch Developing and ACUITE AA/ Rating Watch Negative Implications. The NCDs are issued in six series, with 24-month, 36-month, and 60-month tenures.  This blog will dive into the company’s background, the current issue, and its financial performance. Below are the details of the issue:
Issue Highlights

Issuer Name
IIFL Samasta Finance Limited

Nature of Instrument
Secured Rated Listed Redeemable Non-Convertible Debentures

Rating
CRISIL AA- /Watch Developing and ACUITE AA / Rating Watch Negative Implications

Seniority
Senior Secured

Face Value
Rs. 1,000 per NCD

Base Issue Size
Rs.200 crores  

Option to retain oversubscription
Rs. 800 crores

Coupon
Up to 10.50%

Tenor
24/36/60 months

Issue Date
June 03, 2024, to June 14, 2024

Minimum Investment
Rs. 10,000 only

Specific Terms of the NCD Public Issue across different series

Company Profile

IIFL Samasta Finance Limited is a systematically important Non-Banking Finance Company and a microfinance institution dedicated to working towards women’s economic empowerment. It was established in March 2008 and is a subsidiary of IIFL Finance Limited.
Mr. Venkatesh N is the founder and managing director of IIFL Samasta Finance Ltd. who has over 23 years of experience in financial services as an entrepreneur.
IIFL Samasta aims to involve individuals in bringing social change where it is most needed.
As of March 31, 2024, the company has a presence in 1,648 branches in 21 states and one union territory in India through 16,519 employees (including trainees), serving an active customer base of 30.01 lakh. The registered office is located in Bengaluru.
The Gross AUM of IIFL Samasta Finance Ltd. as of March 31, 2024, was ₹ 14,211.28 crore.
The company offers a wide range of loans  such as:

Income generation loans
Top-up loans
Water and sanitation loans
Consumer durable loans

Performance Highlights of IIFL Samasta Finance Limited for March 31, 2024

Financial Parameters of the Company: (Rs. in crores)

Particulars
FY 2022
FY 2023
FY 2024

Gross AUM
6,483.84
10,552.12
14,211.28

Net Interest Income 
617.69
1,159.25
1,852.71

Profit after tax
50.60
128.18
503.04

Net Worth
969.04
1,272.85
1,919.99

% Stage 3 Loans on Loans (Principal Amount)
3.07%
2.12%
1.91%

% Net Stage 3 Loans on Loans (Principal Amount)
0.82%
0.80%
0.33%

Tier I Capital Adequacy Ratio (%)
15.85%
13.49%
17.67%

Tier II Capital Adequacy Ratio (%)
1.98%
3.65%
6.32%

Competitive Strengths
Several strengths have driven the company’s growth trajectory and expansion. Some of them are mentioned below:

A customer-centric business model helps in retaining customers.

As of March 31, 2024, it had served 3.001 million active customers and its customer-centric business model enables it to retain a high percentage of their existing customers and at the same time attract new ones. 

Expansion of branches in rural areas achieved through calibrated and contiguous growth

The company’s extensive presence in rural regions helps on a considerable scale and diversification benefits. The company’s presence (AUM-wise break-up), compared to the MFI industry is listed below:

As of March 31, 2024, we have a presence in 21 states and one union territory (Puducherry) in India through 1,648 branches and 10,522 loan officers.

Proven history of strong financial performance and operational efficiency

The company has a proven track record of strong financial performance and operational efficiency over the years, driven by high customer retention rates, geographic expansion, and prudent risk management. 
The Gross AUM grew at a CAGR of 48.00% from ₹ 6,483.84 crore as of March 31, 2022 to ₹ 14,211.28 crore as of March 31, 2024 whereas net interest income grew at a CAGR of 73.19% from ₹ 617.69 crore in Fiscal 2022 to ₹ 1,852.71 crore in Fiscal 2024.

Experienced management team with extensive expertise in the field

The company, led by a professional management team, has an established track record in the financial services industry. Their extensive experience has been instrumental in strengthening its risk management, compliance, and governance framework.
Risk Factors 
The risk factors mentioned in this section are not exhaustive. There may be additional unknown risks and uncertainties, currently deemed insignificant, that could also impact the company’s business, financial condition, and overall performance.

The company deals with higher-risk clients and offers unsecured loans, thereby exposing its business to the risk of non-performing assets (NPAs).
The company has a presence in over 21 states and one union territory, however, its operations are majorly concentrated in Tamil Nadu, Bihar, Karnataka, Rajasthan, and Uttar Pradesh. Any adverse developments in these states could hurt its business, results of operations, financial condition, and cash flows.
An increase in the portfolio of non-performing assets and/ or provisions may materially and adversely affect its business and results of operations.
Nearly all interest income comes from loans due within two years. A significant reduction in these short-term loans could lead to a corresponding decrease in interest income.

Investor Categories 
The investor categories in a bond public issue are the various segments or types of investors who are eligible to participate in the offering. The issuer allocates the ratio based on guidelines set by regulatory bodies such as SEBI, aiming to distribute the existing bonds among the various investor categories. Below is the allocation ratio for the IIFL Samasta Finance Limited Public Issue across these categories.
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- 30% of the overall issue size- Companies, Co-operative Banks, Trusts, Partnership Firms, Association of Persons, etc.
Category III– High Net-worth Individual Investors- 30% 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- 30% 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) is a comprehensive document providing investors with in-depth information about the bond public issue. It gives extensive insights into the issuer’s business, financial background, management team, details of offerings, associated investment risks, and fund allocation from the issue, alongside regulatory and legal disclosures.
The link to the Information Memorandum of bond public issue of IIFL Samasta Finance Limited is given below:
https://www.thefixedincome.com/storage/bondprimary_imfiles/1716900379IIFLSAMASTAFINANCELIMITEDIM.pdf
Conclusion
Summing up, the bond public issue by IIFL Samasta Finance Limited is an excellent opportunity for those investors interested in investing in Secured Rated Listed Redeemable Non-Convertible Debentures. Investors can take part in this offering and benefit from the returns associated with the issue. However, investors need to 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 the debt market are subject to market risk, kindly read all the documents carefully.