Dhani Loans NCD Issue with 11% coupon, a good short term bet

Details of the DEM:

Problem size: Basic issue size: Rs. 150 crore with an option to keep the oversubscription up to Rs. 150 crore totaling Rs. 300 crore in value.

Issue period- January 4 January 27 2021

These NBFC subsidiary NCDs are of a secure nature, that is to say backed by a cover of 1.25 times on principal and interest.

Minimum investment: Rs. 10,000

About Dhani:

About Dhani:

The company is an NBFC registered with RBI and offers a range of offline and online financing facilities. The company is a 100% no depository subsidiary of Dhani Services Limited. As digitization transformed the banking and financial industry, the company recognized a great opportunity and ventured into the retail lending space with Dhani Loans and Services Limited.

Credit rating :

Credit rating :

IVR AA / Stable Outlook – This Infomerics rating indicates low credit risk and therefore there is likely a likelihood of timely servicing of the bonds.

Interest rate and payment term

Interest rate and payment term

Option Duration in months Interest payments Coupon interest Effective yield
I 370 days Cumulative N / A 10.00%
11 24 Annual 10.50% 10.50%
111 24 Accumulation N / A 10.50%
IV 24 Monthly 10.03% 10.50%
v 36 Annual 11.00% 10.99%
VI 36 Accumulation N / A 11.00%
VII 36 Monthly 10.49% 11.00%
Conclusion:

Conclusion:

This is a good bet considering the low interest rate regime with extended security as being of a secure nature. Moreover, the highest coupon rate of 11% for a term of 3 years is a good bet, if at all, the rates even tend to increase over time. However, be careful not to deploy a large portion of your surplus to invest, as the rating of the debenture can change at any time.

Also, when it comes to its finances, the company has been suffering losses for some time, so for some analysts and pundits the higher “A” rating is out of sync. So at best the instrument will be a good bet for investors with a high risk profile.

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