IIFL Samasta Finance Limited- A Review of Bond Public Issue

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IIFL Samasta Finance Ltd.
IIFL Samasta Finance Ltd.

IIFL Samasta Finance Limited has come up with Secured, Rated, Listed, Redeemable Non-Convertible Debentures from December 04, 2023, to December 15, 2023.  This is an attractive investment opportunity for investors as it has a credit rating of AA-/ Positive by CRISIL and AA/ Stable by Acuite besides the company’s strong profile and impressive financial performance. This blog gives an overview of the company, the 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 AA-/Positive by CRISIL and AA/Stable by Acuite 
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 December 04, 2023, to December 15, 2023
Minimum Investment Rs. 10,000 only

Specific Terms of the NCD Public Issue across different series

Specific Terms of the NCD Public Issue across different seriesIIFL Samasta Finance Limited
Specific Terms of the NCD

 

Company Profile

  • IIFL Samasta Finance Limited is a systematically important Non-Banking Finance Company and a microfinance institution committed to working towards women’s economic empowerment. It was incepted 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 more than 20 years of experience in financial services as an entrepreneur.
  • The vision of IIFL Samasta is to engage individuals in bringing social change where it is most needed.
  • As of September 30, 2023, the company had a presence in 21 states and one union territory (Puducherry) in India through 1,485 branches and 10,802 loan officers. The registered office is located in Bengaluru.
  • The Gross AUM of IIFL Samasta Finance Limited as of September 30, 2023, was Rs. 12,195.93 crore.
  • The company offers a wide range of loans  such as:
  • Income generation loans
  • Top-up loans
  • Water and sanitation loans
  • Consumer durable loans

Corporate Structure

IIFL Corporate Structure
IIFL Corporate Structure

 

Performance Highlights of IIFL Samasta Finance Limited for the six-month period ended September 30, 2023

Performance Highlights of IIFL Samasta Finance Limited
Performance Highlights of IIFL Samasta Finance Limited

Financial Parameters of the Company:

(Rs. in crores)

Particulars FY 2021 FY 2022 FY 2023 For six months period ended September 30, 2023
Gross AUM  4,795.57 6,483.84 10,552.12 12,195.93
Net Interest Margin (%) 9.40% 8.80% 9.15% 9.41%
Net Interest Income 444.39 617.69 1,159.25 857.46
Profit after tax 66.62 50.60 128.18 232.97
Net Worth 649.51 969.04 1,272.86 1,474.43
Tier 1 Capital Adequacy Ratio (%) 15.14% 15.85% 13.49% 15.12%
Tier II Capital Adequacy Ratio (%) 3.42% 1.98% 3.65% 5.92%

Performance Highlights of IIFL Samasta Finance Limited 2023 for six months ended September 30, 2023. 

 

Financial Metrics 

IIFL Samasta Finance Limited has maintained strong financial performance and operational efficiency through customer retention, expanding geographically, and managing risks effectively. Their strategic branch expansion in India’s rural markets has reduced operating costs and improved economies of scale. Their operating expense to quarterly average gross AUM ratio was 6.39% for the six months ended September 30, 2023.

  • As of September 30, 2023, the gross AUM of the company was Rs. 12,195.93 crore.
  • Disbursements across their financing products were Rs. 5566.19 crore for the six-month period ended September 30, 2023.
  • The company’s net interest income for the six-month period ended September 30, 2023, was Rs. 857.46 crore.
  • The net margin of the company for the six-month period ended September 30, 2023, was 9.41%. 
  • As of September 30, 2023, the net NPAs stood at Rs. 47.26 crore, and gross NPA was at Rs. 174.91 crore, which amounts to 0.57 % and 2.11 %, respectively, as a percentage of the company’s gross loan book.
  • As of September 30, 2023, the total Borrowings were Rs. 8,071.56 crore, of which Rs. 4,725.78 crore were to mature or repaid in less than a year.
  • Samasta’s promoter, IIFL Finance Limited holds 99.51% of their outstanding Equity Shares as of September 30, 2023.
  • The company’s  CRAR calculated based on RBI norms applicable to NBFC – MFI – was 17.14%, 17.83%, and 18.56% as of March 31, 2023, 2022, and 2021 respectively.

Rating Rationale

The rating rationale outlines the following key factors influencing the ratings of IIFL Samasta Finance Limited:

Strengths

  • Strong financial and managerial support from IIFL Finance, the parent company– The parent company will offer assistance in times of distress due to its significant ownership stake.
  • Adequate capitalization– Given the parent’s capacity and readiness to inject funds as needed, Samasta’s capitalization will remain adequate in the future.
  • Improving diversity in funding profile– Samasta has significantly improved the diversity in its resource profile since its acquisition by IIFL Finance.
  • Significant AUM growth while maintaining sound asset quality– As of June 30, 2023, IIFL Samasta showed sound asset quality, as evidenced by Gross Non-Performing Assets (GNPA) of 2.11% and NNPA of 0.62%.

Weakness

  • Geographic concentration in operations– The loan portfolio of Samasta, though gradually diversifying, is concentrated with 60% of its portfolio in just four states, Tamil Nadu, Bihar, Rajasthan, and Karnataka, as of June 2023.
  • Monitoring is essential for the maintenance of asset quality performance and credit loss control– In fiscal 2023, Samasta disbursed Rs 10213 crore, mostly in the latter half of the year. They pre-closed the existing loans and disbursed fresh loans aiming to revive their businesses which led to increased prepayments during the fiscal year.
  • Susceptibility to risks inherent to the microfinance segment– IIFL Samasta Finance Limited provides unsecured loans to financially challenged borrowers. Due to the sensitive nature of these borrowers, government regulations concerning their policies are of utmost importance. Also, the inherent nature of the business makes the portfolios susceptible to event risks like natural disasters within the operational areas.

Investor Categories 

The investor categories in a bond public issue can be said to be the various segments or types of investors who can participate in the offering. The allocation ratio is determined by the issuer in accordance with guidelines set by regulatory bodies such as SEBI, aiming to distribute the existing bonds among different sets of investors. Here 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- 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.   

 

How to Apply through TheFixedIncome.com?

 

How to Apply through_TheFixedIncome.com
How to Apply through_TheFixedIncome.com

 

Information Memorandum:

An Information Memorandum (IM) is a detailed document furnishing investors with in-depth information about the bond offering. It provides thorough 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/1701165280IIFLSamastaIM.pdf

Conclusion

In essence, the bond public issue by IIFL Samasta Finance Limited presents an excellent opportunity for investors interested in investing in Secured Rated Listed Redeemable Non-Convertible Debentures. Investors can seize this opportunity and avail the returns associated with the public issue. Before investing, it’s crucial for investors to go through the IM thoroughly and take into account their risk appetite and investment objectives.

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.  

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