LOANS - Get Ready to Pay Higher EMIs

LOANS - Get Ready to Pay Higher EMIs
Vivek Kaul's Diary 
Wed, 30 May 2018

ebook
Yogi Berra, the famous American baseball coach used to say, "It's tough to make prediction, especially about the future."
With this disclaimer up at the very beginning, let me make a prediction: Interest rates are all set to rise. Get ready to pay higher EMIs.
India has had low interest rates for a while. That is set to change. And in the months to come, interest rates will go up.
Why do we say that? Take a look at Figure 1, which plots the incremental deposit ratio of banks, over the last four years. (Okay, we know, incremental credit deposit ratio sounds like something very difficult to understand. Keep reading. Let's assure you, it's not).
Figure 1:
 
The incremental credit deposit ratio is obtained by dividing the total loans given out by banks in the last one year by the total deposits raised by banks during the same period. In case of loans or credit, we consider the non-food credit number. Banks in India give loans to Food Corporation of India and other state procurement agencies to primarily buy rice, wheat and pulses, directly from farmers. Once we remove these loans from the total credit, what remains is the non-food credit.

It is clear from Figure 1 that over the last six months, the incremental credit deposit ratio has been greater than 100%. In November 2017, the incremental credit deposit ratio touched a high of 223%.
What does this mean? It means that banks have been lending more than they have been borrowing (in the form of deposits). Banks have managed to continue lending simply because a surfeit of deposits landed up with them in the aftermath of demonetisation.
Now take a look at Figure 2 which basically plots the credit deposit ratio.
Figure 2:
 
Credit deposit ratio is basically the total loans of given by banks at any point of time divided by the total deposits the banks have at the same point of time.
Figure 2 tells us that over the last few months, the credit deposit ratio of 74% or more. What does this mean? It basically means that 74% or more of bank deposits have been given out as loans.
It needs to be kept in mind here that banks need to maintain a cash reserve ratio of 4% with the Reserve Bank of India (RBI). This basically means that banks need to maintain Rs 4 out of every Rs 100 of deposit, as a reserve with the RBI.
Over and above this, banks need to maintain a statutory liquidity ratio of 19.5%. This means that Rs 19.5 out of every Rs 100 of deposits, needs to be compulsorily invested in government bonds.
This means that Rs 23.5 out of every Rs 100 of deposits raised by banks, cannot be loaned out. That leaves Rs 76.5. 76.5% of bank deposits can be given out as bank loans. Currently, the credit deposit ratio is at 74.24%. This of course considers just non-food credit. Over and above this, there is food credit to consider as well. So banks have very little leeway available to continue to lend more, at the current level of deposits.
Of course, deposits are not the only form of funding available to banks, but they continue to be the major form of funding. Deposits typically tend to for 92-93% of the total liabilities of banks.
With very little leeway available for lending remaining at the current level of deposits, interest rates are bound to go up. Of course, as has been seen in the past, banks increase interest rates on loans much quicker than the rates of interest that they pay on their deposits.
A few more points need to be considered here:
1) As interest rates go up, borrowers will have to pay higher EMIs on their loans.
2) Interest rates and bond prices are negatively correlated. This means that as interest rates go up, bond prices will fall. In this scenario, banks will lose money on their available for sale bond portfolio. This will happen in a scenario, where bad loans of banks have already touched a close to Rs 10 lakh crore.
3) Also, it needs to be mentioned here that 11 out of 21 public sector banks have been put under preventive corrective action by the Reserve Bank of India. Of these banks, the Dena Bank and the Allahabad Bank, have been barred from lending. As far as other banks under the preventive corrective action framework are concerned, they are afraid of lending, in order to avoid ending up accumulating more bad loans. A bad loan is essentially a loan which hasn't been paid for 90 days or more. In this scenario, where many banks are not in a position to lend, interest rates are bound to go up.
4) Corporates looking to raise short-term loans have already started to pay higher rates of interest on these loans.
To conclude, interest rates will go up in an environment of higher oil prices and rupee losing value against the dollar. This will add to the inflation or the rate of price rise. Not something that a government which is getting ready for elections in the next 12 months, is going to like. But that's how it is looking right now.
Stay tuned!
Regards,
Vivek Kaul
Vivek Kaul
Editor, Vivek Kaul's Diary
Share:

IndoStar Capital reports 19% y-o-y AUM growth to Rs.6,207 Cr


IndoStar Capital reports 19% y-o-y AUM growth to Rs.6,207 Cr and 14% increase in Net interest income as part of FY 18 results

Chennai, May 30, 2018: IndoStar Capital Finance Limited (IndoStar), one of India’s leading non- banking financial companies, announced its financial results for the year ending March 31, 2018. The NBFC reported Net Interest Income of Rs. 378.7Cr for FY18, a rise of 14% from Rs. 331.7 Cr in FY17 and a Profit After Tax of Rs. 224.4Cr for FY18, an increase of 6% from Rs. 210.8 Cr in FY17.  This is the first annual results announcement after the company’s successful listing on the NSE and BSE on May 21, 2018.

Summary: Consolidated – FY18

Particulars (Rs. Cr)
Q4 FY18
Q4 FY17
QoQ%
Q3 FY18
QoQ %
FY18
FY17
YoY %
Net Interest Income
           92.9
            87.4
6%
           93.7
-1%
   3,78.7
   3,31.7
14%
Total Income
        1,52.6
         1,02.7
49%
        1,28.3
19%
   5,09.5
   4,08.1
25%
PAT
           60.3
            57.6
5%
           53.6
12%
   2,24.4
   2,10.8
6%

Consolidated financial update for the year ended March 31, 2018 (FY18)
·         Networth stood at Rs. 2137.1 Cr for FY 18 up 12% y-o-y from Rs. 1,902.8 Cr for FY 17
·         The disbursement of loans was over Rs. 5,388.4 Cr for FY 18 up by 10% compared to Rs. 4,903.4 Cr in FY 17
·         AUM stood at Rs. 6,207.3 Cr for FY 18, a rise of over 19% y-o-y from Rs. 5,235.9 Cr for FY 17
Key company developments:
·          The employee number is over 1,094 as on March 31, 2018 as compared to 93 in March 31, 2017
·         The company expanded from 7 branches as on March 31, 2017 to 91 branches as on March 31, 2018 to offer Vehicle Finance, SME Finance and  Housing Finance
The Gross NPA of the Company was at 1.3% as on March 31, 2018 (on 90 DPD NPA recognition basis) as compared to 1.4% as on March 31, 2017 (on 120 DPD NPA recognition basis). The Net NPA of the Company was at 1.1% as on March 31, 2018 (on 90 DPD NPA recognition basis) as compared to 1.2% as on March 31, 2017 (on 120 DPD NPA recognition basis).

The Capital Adequacy Ratio of the company stood at 28.3as on March 31, 2018. The company has forayed into Home Finance and Vehicle Finance in the September 2017 and December 2017.

Commenting on the results, R. Sridhar, Executive Vice- Chairman & CEO, said, “IndoStar has consistently posted positive results for the past 7 years while maintaining an excellent asset quality. We are happy to post our first annual result after listing. Our PAT has increased at 6% while we made substantial investments in creating branch infrastructure and manpower for expanding into new business segments. Our primary growth engine will be Corporate Lending and Vehicle Finance whereas Housing Finance and SME Finance will offer strategic leverage.

About IndoStar Capital Finance Limited

IndoStar Capital Finance Ltd. (IndoStar) is a professionally managed and institutionally owned organization, which offers structured term financing solutions for corporates, and loans to small and medium enterprise (“SME”) borrowers in India. It has recently expanded its portfolio to offer vehicle finance and housing finance products through its network of branches. The housing finance business is operated through IndoStar’s wholly-owned subsidiary IndoStar Home Finance Private Limited, which commenced operations in September 2017.
For more information, visit- www.indostarcapital.com
https://ssl.gstatic.com/ui/v1/icons/mail/images/cleardot.gif



For media contact

Michael Ananth R | Senior Account Executive  
Concept Public Relations
D: +91 44 4353 9451 M: +91 9677473147 E: ananth@conceptpr.com
A: 1st Floor, Florida Towers, 138 / 30, Nelson Manickam Road, Chennai - 600 029.
Attachments area


Share:

All you want to know about Company Fixed Deposits..!

All you want to know about Company Fixed Deposits..!


Company FDs have gained popularity among several companies as they provide higher rate of interest and better flexibility compared to the bank fixed deposits. Moreover, their simple-to-understand features and easy online application makes it feasible for employees to make the most out of this investment option.

Secure Way to Start for Beginners


Company Fixed Deposits are the most secured way to start with if you are beginner. Company fixed deposits are not affected by market fluctuations. Also, they do not lead to loss of revenue due to crashes. Being new in the market and amateur at investment schemes, beginners need a little more experience before investing in bigger schemes. Hence, company FD are a good option for the start.

Invest Small Receive Big


Many finance companies allow opening an FD account with as small amount as Rs 25000. Those willing to invest with a minimum amount can meet this requirement. In addition, the good news is that despite putting in a small amount, the return that you receive at the end of the tenor is quite big (depending upon the tenor you select).

Higher Rate of Interest


When you think of FDs, bank is what comes to your mind. Apart from banks, there are several Non-Banking Financial Companies (NBFCs) that offer the facility of fixed deposits. Here, fixed deposit interest rate offered is higher compared to the savings accounts or FD interest rate of other banks. For instance, Bajaj Finance fixed deposit offers 8.2% interest for senior citizens and 8.15% for clients who have availed loan facility with them. For new investors, they offer 8.05%, which is the highest fixed deposit interest rate in the market.


No TDS on Company Fixed Deposits If…


If the interest on your FD is less than Rs.5000 in a year, no TDS is levied. Hence, as an investor you are at a benefit, if the interest amount does not exceed the limit. In case, if you observe that your interest amount is exceeding Rs 5000, you can opt for other similar investment schemes with tax exemption.

Track Record of the Company

Before investing your hard-earned money in any of the companies, it would be advisable for you to check their track record. Although the companies may offer higher rate of interest, a background check about the reputation of the company and their performance in the market always helps. The better the company and higher its value in the market, the more benefits you earn. Being a valuable asset, FDs can be pledged to the bank to avail the facility of Loan against Securities.

Easy Application


With all the financial companies going digital, it is now easier to avail the facility of company fixed deposits with a click. The online application process can help you apply for loan sitting at home, and have the documents collected by the company’s representative at your convenience. The entire process being a transparent one, gives you no reason to be skeptic about your investment. The online application process is designed especially for senior citizens, students and homemakers who cannot stand in the long queues or travel long distances.

Cumulative/Non-Cumulative – The Choice is yours


Making this choice depends upon your financial requirement. If you are willing to receive the whole amount of interest at the time of maturity, you can opt for cumulative fixed deposit. However, if you are willing to enjoy the interest on monthly, quarterly, half-yearly or annually, you can choose non-cumulative fixed deposit. So, choose smart to live smart!

Share:

DHFL NCD Issue opens on May 22, 2018 - Options of 3, 5, 7, 10 year tenor with attractive interest rate of up to 9.10% p.a.


  

                                           DHFL NCD Issue opens on May 22, 2018


·         Options of 3, 5, 7, 10 year tenor with attractive interest rate of up to 9.10% p.a.
·         Attractive additional one-time incentive of up to 1.00% payable on maturity to Category III and Category IV investors investing in Series II, Series III, Series IV and Series VI NCDs
·         Additional interest of 0.10% on initial subscription amount for senior citizens
·         Floating Interest Rate NCD benchmarked to Overnight MIBOR

·         Triple A Rating: “CARE AAA” by CARE (Triple A; Outlook: Stable); “BWR AAA (Pronounced as BWR Triple A), Outlook: Stable” by Brickwork
·         Minimum application size Rs. 10,000 collectively across all Series
·         Allotment on first-come, first-served basis[1]
·         Investors have an option to apply for NCDs in dematerialized or in physical form
·         No TDS applicable for NCDs in Demat form
·         NCDs proposed to be listed on BSE and NSE

Chennai, May 21, 2018: Dewan Housing Finance Corporation Limited (“DHFL” or the “Company”), one of India’s leading private sector housing finance companies registered with National Housing Bank (NHB), proposes to open on May 22, 2018, a public issue of up to 12 crore secured redeemable Non-Convertible Debentures (“NCD”) of face value of Rs. 1,000 each, for an amount of Rs. 3,000 crore (“Base Issue Size”) with an option to retain oversubscription of up to Rs. 9,000 crore aggregating up to Rs. 12,000 crore (“Tranche 1 Issue Limit”) (“Tranche 1 Issue”) and is being offered by way of the Tranche 1 Prospectus dated May 14, 2018, containing, Inter Alia, the terms and conditions of this Tranche 1 Issue (“Tranche 1 Prospectus”), which should be read together with the Shelf Prospectus dated May 14, 2018 (“Shelf Prospectus”) filed with the Registrar of Companies, Maharashtra, Mumbai (“ROC”), Stock Exchanges and Securities and Exchange Board of India (“SEBI”). The Shelf Prospectus and this Tranche 1 Prospectus constitutes the Prospectus (“Prospectus”).

The Issue is scheduled to close on June 4, 2018 with an option of early closure or extension as decided by the Board of Directors of the Company (“Board”) or the NCD Public Issue Committee.


Photo Caption (L-R)
1.      PRAVEEN KUMAR, IIFL HOLDINGS LIMITED
                               2.      LOKESH SINGHI, EDELWEISS FINANCIAL SERVICES LIMITED
                 3.      SANTOSH SHARMA, CHIEF FINANCIAL OFFICER, DHFL


Triple AAA Rating

The NCDs proposed to be issued have been rated ‘CARE AAA; Stable (Triple A; Outlook: Stable)’ for an amount upto Rs. 15,000 crore, by CARE Ratings Limited (“CARE”) vide their letter dated April 27, 2018 and ‘BWR AAA (Pronounced as BWR Triple A), Outlook: Stable’ (for an amount upto Rs. 15,000 crore, by Brickwork Ratings India Private Limited (“Brickwork”) vide their letter dated April 27, 2018. The rating of CARE AAA; Stable by CARE and BWR AAA, Outlook: Stable’ by Brickwork indicate that instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations.

Mr. Santosh Sharma, Chief Financial Officer, DHFL, said,
“Over the last few years, DHFL has been reporting high growth in an increasingly competitive landscape. These are exciting times for DHFL as it strengthens its commitment to actively expand financial inclusion across India and provide greater impetus to the Government’s mission of Housing for All by 2022. The launch of DHFL’s third public issue NCD at this critical phase of growth is set to provide a strong thrust to the company’s growth plans as we progress towards the next phase of high growth.  It also allows us to diversify our borrowing portfolio..

In line with DHFL’s efforts to always bring value-addition to its stakeholders, the company has introduced a floater rate NCD which is benchmarked to Overnight MIBOR. Investors in MIBOR linked NCDs will receive interest based on Overnight MIBOR rate published by FBIL compounded daily and payable annually. We are also offering an attractive interest rate of upto 9.10% p.a., one-time additional incentive of upto 1.00% to initial subscribers on maturity and an additional interest of 0.10% p.a for senior citizens. Backed by strong stakeholder trust and our unwavering commitment towards enabling affordable housing dreams, I am confident that DHFL will once again report yet another successful NCD issuance to achieve its ambitious growth plans.”

The minimum application amount is Rs.10,000 collectively across all options on NCDs and in multiples of One (1) NCD after the minimum application. Allotment is on a first-come-first-serve basis (except on the date of oversubscription, if any, when all the investors applying on the said date will get allotment on a proportionate basis). Investors have an option to apply for NCDs in dematerialized as well as in physical form. 

Issue Structure:
·         In Series I, the tenor is 3 years and the frequency of coupon payment is annual; the coupon rate for Category I, Category II, Category III and Category IV investors is 8.90%; effective yield for all the categories is 8.90%.

·         In Series II, the tenor is 5 years and the frequency of coupon payment is annual; the coupon rate for Category I & Category II investors is 8.90%; the coupon rate for Category III & Category IV investors is 9.00%; effective yield for Category I & Category II investors is 8.90%; effective yield for Category III & Category IV investors is 9.00%.

·         In Series III, the tenor is 7 years and the frequency of coupon payment is annual; the coupon rate for Category I & Category II investors is 8.90%; the coupon rate for Category III & Category IV investors is 9.00%; effective yield for Category I & Category II investors is 8.90%; effective yield for Category III & Category IV investors is 9.00%.

·         In Series IV, the tenor is 10 years and the frequency of coupon payment is annual; the coupon rate for Category I & Category II investors is 8.90%; the coupon rate for Category III is 9.00% & for Category IV investors is 9.10%; effective yield for Category I & Category II investors is 8.90%; effective yield for Category III is 9.00% & Category IV investors is 9.10%.

·         In Series V, the tenor is 3 years and the frequency of coupon payment is monthly; the coupon rate for Category I, Category II Category III and Category IV investors is 8.56%; effective yield for all categories of investors is 8.90%.

·         In Series VI, the tenor is 5 years and the frequency of coupon payment is monthly; the coupon rate for Category I & Category II investors is 8.56%; the coupon rate for Category III & Category IV investors is 8.65%; effective yield for Category I & Category II investors is 8.90%; effective yield for Category III & Category IV investors is 9.00%.

Floating Interest Rate NCD

In Series VII, the tenor is 3 years and the coupon rate is Benchmark MIBOR plus spread of 2.16%. Benchmark MIBOR is the Reference Overnight MIBOR published by FBIL computed on an annualised basis and is subject to reset annually based on Overnight MIBOR benchmark rates. Floating Interest rate payable at the end of 1st year will be Benchmark MIBOR for the relevant Calculation Period plus applicable fixed spread of 2.16%. As an example, Overnight MIBOR of 6.01% compounded on an  annualised basis is 6.19%. This will be computed again for the relevant Calculation Period for 1st, 2nd and 3rd Interest Payment Dates. 

Benefits to senior citizens

Category III and Category IV Investors in the proposed Tranche 1 Issue who are senior citizens on the Deemed Date of Allotment shall be eligible for an additional interest rate of 0.10% p.a. provided the NCDs issued under the proposed Tranche 1 Issue are continued to be held by such investors under Category III and Category IV on the relevant Record Date applicable for payment of respective coupons. This incentive shall be applicable on an amount not exceeding initial subscription amount.

Additional Incentive

Category III and Category IV Investors in the proposed Tranche 1 Issue, who are initial allottees as on the Deemed Date of Allotment, shall be eligible for a one-time additional incentive of 0.50%, 0.70%, 1.00% and 0.50% for Series II, Series III, Series IV and Series VI respectively, payable along with last interest payment, provided the NCDs under Series II, Series III, Series IV and Series VI, as applicable, are held by such investors under Category III and Category IV on the relevant Record Date, for all interest payments including the last interest payment. This incentive shall be applicable on an amount not exceeding initial subscription amount.

[Category IV Investors (Retail Individual Investors) are defined as Resident Indian individuals and HUFs through the Karta applying for an amount aggregating for an amount up to and including Rs. 10 lakh, across all Series of NCDs. Category III Investors (High Net-worth Individuals or HNIs) Investors are Resident Indian individuals and HUFs through the Karta applying for an amount above Rs. 10 lakh, across all Series of NCDs].

Atleast 75% of the net proceeds of the Public Issue of NCDs will be used for the purpose of onward lending, financing, and for repayment/ prepayment of interest and principal of existing borrowings of the Company. A maximum of up to 25% will be used for general corporate purposes.

The NCDs offered through this Shelf Prospectus Tranches I Prospectus are proposed to be listed on the National Stock Exchange of India Limited (“NSE”) and BSE Limited (“BSE”), where BSE is the designated stock exchange.

The Lead Managers to the NCD Issue - YES Securities (India) Ltd, Edelweiss Financial Services Ltd., A. K. Capital Services Ltd., Axis Bank Limited, Green Bridge Capital Advisory Private Limited, ICICI Bank Ltd., ICICI Securities Limited, IIFL Holdings Limited, IndusInd Bank Limited, SBI Capital Markets Limited and Trust Investment Advisors Private Limited.
About DHFL
DHFL was founded in 1984 by Late Shri Rajesh Kumar Wadhawan, with a vision to provide financial accessibility to lower and middle income customer segments among semi-urban and rural populace in India. Led by Mr. Kapil Wadhawan, Chairman and Managing Director, DHFL is one of the leading housing finance companies in India with a large network across the country that caters to millions of customers in the LMI category. DHFL has been rated CARE AAA (Triple A) and assigned BWR AAA from Brickworks Rating.
Over the last 34 years, DHFL has provided customers with a vast array of home loan products including loans on homes, residential plots, construction, LAP or loan against property as also mortgage, non-residential and project loans. The company’s wide network, deep understanding of customer needs gathered over time, enables DHFL to offer customised financial access to LMI customers in India’s smallest towns. With strong business fundamentals and proven industry expertise, DHFL is a highly respected and trusted financial services company with a concerted focus towards enabling home ownership to the LMI customer segment in India. DHFL’s CSR efforts are an integral part of the Company’s ethos, fulfilling critical societal needs through Economic Empowerment through Financial Literacy, Skill Development, Rural Development with focus on Drought Mitigation and Early Childhood Care and Education (ECCE), implemented with measurable outcomes. DHFL also has representative offices in Dubai, London and the UAE. For further information, please visit www.dhfl.com
Disclaimer: Dewan Housing Finance Corporation Limited, subject to market conditions and other considerations, is proposing a public issue of secured redeemable non-convertible debentures (“NCDs”) and has filed the Shelf Prospectus dated May 14, 2018 and Tranche 1 Prospectus dated May 14, 2018 with the Registrar of Companies, Maharashtra, Mumbai, National Stock Exchange of India Limited, BSE Limited and SEBI. The Shelf Prospectus dated May 14, 2018 and Tranche 1 Prospectus dated May 14, 2018 are available on our website at www.dhfl.com, on the website of the stock exchanges at www.nseindia.com and www.bseindia.com and the respective websites of the lead managers at www.yesinvest.in, www.edelweissfin.com, www.akgroup.co.in, www.axisbank.com, www.greenbridge.in, www.icicibank.com, www.icicisecurities.com, www.iiflcap.com, www.indusind.com, www.sbicaps.com and www.trustgroup.in. Investors proposing to participate in the Issue should invest only on the basis of information contained in the Shelf Prospectus dated May 14, 2018 and Tranche 1 Prospectus dated May 14, 2018. Investors should note that investment in NCDs involves a high degree of risk and for details relating to the same, please refer to the Shelf Prospectus dated  May 14, 2018, including the section ‘Risk Factors’ beginning on page 11 of the Shelf Prospectus dated May 14, 2018.

For more information, contact:
DHFL: Ms. Priyanka Rawlani (Mobile: 09833210451)
Adfactors PR: Mr. Nikhil Mansukhani (Mobile: 09833552171, 09820531932)


[1]except on the day of oversubscription, if any, where the Allotment will be proportionate

Share:

Topics

Blog Archive

நிதி முதலீடு

ADVT

Recent Posts

Latest Posts

Find us on Facebook

NRI INVESTMENTS