These NCDs can be considered by those in the lowest tax slab and with a high risk appetite

FEATURES: These are secured redeemable, nonconvertible debentures (NCD) of India Infoline Housing Finance (IIHFL), the housing finance arm of India Infoline, a financial services company. The maiden public issue of IIHFL Home bonds opened on December 12 and will close on December 20. The face value of an NCD is Rs 1,000, the maturity period is five years, the coupon rate is 11.52 per cent per annum payable monthly, while the yield on the NCD is 12.15 per cent per annum. The NCDs would be listed on the National Stock Exchange and the Bombay Stock Exchange. The bonds are secured against home and mortgage receivables. The minimum application amount is Rs 10,000 (10 NCDs).

RATINGS: The bonds carry a rating of AAfrom rating agency Crisil and Care.

PURPOSE OF RAISING FUNDS: The company offers housing loan and loan against property. It plans to raise up to Rs 250 crore with an option to retain over subscription up to Rs 250 crore aggregating crore.

The funds raised through the issue would be used for the financing activities including lending and investments, repaying its existing debt and business operations including capital expenditure and working capital requirements.

COMPANY'S FINANCIALS: IIHFL had an income from operations and profit after tax for the financial year ending March 31 at Rs 45.19 crore and Rs 13.96 crore, respectively, and for the half-year ended September 30 at Rs 39 crore and Rs 11.78 crore, respectively. The company posted a gross NPA of 0.46 per cent and a net NPA of 0.39 per cent as on September 30. It's net worth stood at Rs 301 crore as on September 30.

The bonds carry a poor rating and so are risky. Interest earned on the NCDs would be subject to tax at the normal rates. So for those in the highest tax bracket of 30.9 per cent, the coupon rate of 11.52 per cent would reduce to 8.12 per cent after tax.

For those in 20.56 per cent tax bracket, the actual return would be 9.6 per cent after tax, while those in the lowest tax slab would get a 10.36 per cent return.

Thus, tax-free bonds and public provident fund are best suited for those in the highest tax bracket offering tax-free returns of 8.7-9 per cent. These NCDs can be considered by those in the lowest tax slab and with an appetite to take high risk. However, the minus point is that exiting the NCD would be difficult since there is no trading in the wholesale debt market segment.

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