RETAIL RESEARCH

Secured Taxable NCD Issue

29 Aug 2016

Dewan Housing Finance Corporation Ltd

Summary:
Dewan Housing Finance Ltd has come up with the 1st tranche of Secured Redeemable Non Convertible Debentures (NCDs) of face value of Rs. 1,000 each for an amount of Rs.
2,000 crores (Base issue Size) with an option to retain oversubscription upto Rs. 8,000 crore - for a total amount aggregating upto Rs. 10,000 crore.
The issue will open for subscription from August 29, 2016 to September 12, 2016 (The Company has the option of closing the issue on an earlier date, once it receives the
amount it has targeted). The company will be paying an interest ranging between 9.05% p.a. on these bonds. For the Category III and IV, the company offers the additional
incentive ranging from 5 bps to 20 bps depending on the tenure of the bonds.
The proposed NCDs issue has been rated CARE AAA (Triple A)by CARE and BWR AAA by Brickwork Ratings India Pvt Ltd. Instruments with this rating are considered to have
highest degree of safety regarding timely servicing of financial obligations and carry lowest credit risk.
Please note, in its earlier issue of Rs.4000 cr that opened for subscription on Aug 03, 2016 and closed on Aug 16, 2016, it attracted huge investors attention and the issue was
fully subscribed the very first day of the issue itself. The issuance offered 10 series of bonds whose maturity were ranging from three to 10 years and yields upto 9.5%. In that
issue, the portion reserved for qualified institutional investors were subscribed 27.74 times, and the high net worth individual segment was subscribed 31.07 times. The retail
portion, investing up to Rs 10 lakh, was subscribed 6.18 times, data from BSE shows. Please note, the earlier issue that opened between Aug 03, 2016 and Aug 16, 2016 and the
proposed one that opens on Aug 29, 2016 are two different issuances.
This one is the tranche 1 issue which shall remain open for subscription on Working Days from 10 a.m. to 5 p.m. during the period between August 29, 2016 and September 12,
2016. The issue may be closed on earlier date or extended date which will be decided by the Board of Directors of the Company (Board) or the Finance Committee.
Objects of the Issue: The funds raised through this Issue, after deducting the Issue related expenses to the extent payable, will be used for the purpose of onward lending,
financing, and for repayment / prepayment of interest and principal of existing borrowings of DHFL, long-term working capital: minimum 75% of the net amount raised and
allotted in the Tranche- I Issue; and For General Corporate purpose: upto 25% of the net amount raised and allotted in the Tranche- I Issue.
Issue Terms:
Issuer
Issue
Tranche 1 Issue Size
Type of Instrument
Face Value and issue price (in Rs / NCD)
Minimum Application
Stock Exchanges for listing
Issuance
Trading
Trading Lot
Call / Put options
Rating
Security and asset cover

Dewan Housing Finance Corporation Limited

Public Issue of Secured, Redeemable, Non-Convertible Debentures of face value of Rs. 1,000 each aggregating up to Rs 10000
crore (shelf limit)
Base Issue Size of Rs. 2,000 crore with an option to retain oversubscription up to Shelf Limit i.e. upto Rs. 10,000 crore.
Secured Redeemable Non Convertible Debentures
1,000
Rs. 10,000 (10 NCDs) and in multiple of Rs. 1,000 (1 NCD) thereafter across all Series
NSE & BSE
Both physical and dematerialized form
Compulsorily in dematerialized form
1 (one) Bond
Nil
CARE AAA (Triple A)by CARE and BWR AAA by Brickwork Ratings India Pvt Ltd
The NCDs proposed to be issued will be secured by a first ranking pari passu charge on present and future receivables of the
Issuer for the principal amount and interest thereon (excluding the floating charge on the specific assets as per the provisions
of Section 29B of the National Housing Bank Act, from time to time and exclusive charge created by First Blue Home Finance
Limited (since merged with DHFL, in favour of NHB as security for due repayment for financial assistance by way of refinancing
granted by NHB to First Blue Home Finance Limited). The Issuer reserves the right to sell or otherwise deal with the receivables,
both present and future, including to create a charge on pari passu basis thereon for its present and future financial
requirements, with prior permission of Debenture Trustee in this connection as provide for in the DTD and provided that a
minimum security cover of 1.1 (one point one) time on the principal amount and interest thereon, is maintained.

Issue Details:
Series
Frequency of Interest Payment
Tenor
Coupon (%) for NCD Holders in Category I and Category II
Coupon (%) for NCD holders in Category III and Category IV

I
Annual
3 Years
9.05%
9.10%

II
Annual
5 Years
9.05%
9.15%

III
Annual
7 Years
9.05%
9.25%

Effective Yield (per annum)* in Category I and Category II

Effective Yield (per annum)* in Category III and Category IV

9.05%
9.10%

9.05%
9.15%

9.05%
9.25%

Who can apply?

Category I: (QIB Portion)
Public financial institutions, scheduled commercial banks, Indian multilateral and bilateral development financial institution which are authorised to invest in the NCDs;
Provident funds, pension funds, superannuation funds and gratuity funds, which are authorised to invest in the NCDs;
Venture Capital Funds/ Alternative Investment Fund registered with SEBI;
Insurance Companies registered with IRDA;

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State industrial development corporations;

Insurance funds set up and managed by the army, navy, or air force of the Union of India;
Insurance funds set up and managed by the Department of Posts, the Union of India;
National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India; and
Mutual Funds.

Category II: (Corporate Portion)

Companies within the meaning of section 2(20) of the Companies Act, 2013; statutory bodies corporations and societies registered under the applicable laws in India and
authorised to invest in the NCDs;
Statutory Bodies/Corporations;
Regional Rural Banks
Public/private charitable/ religious trusts which are authorised to invest in the NCDs;
Scientific and/or industrial research organisations, which are authorised to invest in the NCDs;
Partnership firms in the name of the partners;
Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of 2009);
Association of Persons; and
Any other incorporated and/ or unincorporated body of persons.
Category III: (High Net-worth Individual)
Resident Indian individuals who apply for NCDs aggregating to a value more than Rs. 10 lacs, across all Series of NCDs; and
Hindu Undivided Families through the Karta who apply for NCDs aggregating to a value more than Rs. 10 lacs, across all Series of NCDs.
Category IV: (Retail Individual Investors Portion)
Resident Indian individuals who apply for NCDs aggregating to a value not more than Rs. 10 lacs, across all Series of NCDs; and
Hindu Undivided Families through the Karta who apply for NCDs aggregating to a value not more than Rs. 10 lacs, across all Series of NCDs.
Who can not apply?
The following categories of persons, and entities, shall not be eligible to participate in the Issue and any Applications from such persons and entities are liable to be rejected.
Minors without a guardian name*(A guardian may apply on behalf of a minor. However, Applications by minors must be made through Application Forms that contain the
names of both the minor Applicant and the guardian);
Foreign nationals, NRI inter-alia including any NRIs who are (i) based in the USA, and/or, (ii) domiciled in the USA, and/or, (iii) residents/citizens of the USA, and/or, (iv)
subject to any taxation laws of the USA;
Persons resident outside India and other foreign entities;
Foreign Institutional Investors;
Foreign Portfolio Investors;
Foreign Venture Capital Investors
Qualified Foreign Investors;
Overseas Corporate Bodies; and
Persons ineligible to contract under applicable statutory/regulatory requirements.
Basis of Allotment:
Applicants belonging to all three Categories will be allocated as given in the table below:
Particulars
Reservation for each Portion

Category I
30% of the Overall Issue Size

Category II
10% of the Overall Issue Size

Category III
30% of the Overall Issue Size

Category IV
30% of the Overall Issue Size

Note:
Applicants belonging to these categories will be allotted in the first instance on first come first serve basis (determined on the basis of date of upload of the Applications on the
electronic Application platform of the relevant stock exchanges). In case of an oversubscription in any of the Portions, Allotments to the maximum extent, as possible, will be
made on a first-come first-serve basis and thereafter on proportionate basis in each portion, i.e. full Allotment of Bonds to the Applicants on a first come first basis up to the
date falling 1 (one) day prior to the date of oversubscription and proportionate allotment of Bonds to the Applicants on the date of oversubscription (based on the date of
upload of each Application on the electronic Application platform of the relevant stock exchanges, in each Portion).
Credit Rating:
The NCDs proposed to be issued under this Issue have been rated CARE AAA (Triple A) for an amount of Rs 10,000 crore, by Credit Analysis and Research Limited ( CARE )
vide their letter dated August 17, 2016 and BWR AAA (Pronounced as BWR Triple A) Outlook: Stable for an amount of Rs 10,000 crore, by Brickwork Ratings India Private
Limited ( Brickwork ) vide their letter dated August 16, 2016. The rating of CARE AAA 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. Such instruments carry the lowest credit risk.
Interest on application Money: On Allotment 8% p.a.
Interest on Refund: 6% per annum.

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Liquidity and Exit Options: The Bonds are proposed to be listed on the NSE & BSE.
Company Background:
Dewan Housing Finance Corporation Ltd is a deposit-taking housing finance company registered with the NHB and focused on providing financing products for the LMI segment
in India primarily in Tier II and Tier III cities and towns. It has been active in the housing finance sector in India since 1984. It provides secured finance primarily to individuals,
partnership firms and companies for the purchase, self-construction, improvement and extension of homes, new and resalable flats, commercial properties and land. It also
provides certain categories of non-housing loans including loans for commercial property, medical equipment, and for plant and machinery.
DHFL has a robust marketing and distribution network, with a presence across 349 locations including 182 branches, 146 service centers, 18 circle/ cluster offices, 2
disbursement hubs and one collection center, throughout India as at July 31, 2016. In addition to its network within India, it has international representative offices located in
London and Dubai. To broaden customer base and to penetrate further geographically, DHFL has entered into tie-ups with public and private sector banks, including a public
sector bank for eastern India and two other banks for pan-India.
DHFL is now in position to provide asset management services to customers in the LMI segment by leveraging on its pan-India distribution network, including its branches, staff
and sales force, for the marketing, distribution and sale of mutual funds products. In addition, the acquisition of Deutsche Banks asset management business in India allows it
to expand its distribution platform and product portfolios significantly in India.
As at March 31, 2016 and June 30, 2016, DHFLs loan book stood at Rs 61,77,502 lacs and Rs 63,64,661 lacs, respectively and its assets under management were Rs 69,52,388
lacs and Rs 72,01,205 lacs, respectively. As at March 31, 2016 and June 30, 2016 its gross NPAs as a percentage of its loan book was 0.93% and 0.98%, respectively and its net
NPAs as a percentage of its loan book was 0.58% and 0.62%, respectively.
Financial Performance:
(Rs Lacs)

Parameters
Net worth
Total Debt
of which Non Current Maturities of Long Term Borrowing
Short Term Borrowing
Current Maturities of Long Term Borrowing
Unclaimed Matured Deposits and Interest Accrued thereon
Net Fixed Assets
Non Current Assets
Cash and Bank Balances
Current Investments
Current Assets
Current Liabilities
Assets Under Management
Interest Income
Interest Expense
Provisioning & Write-offs
PAT
Gross NPA (%)
Net NPA (%)*
Tier I Capital Adequacy Ratio (%)
Tier II Capital Adequacy Ratio (%)

Fiscal 2016
5,01,700
61,10,366
45,11,947
6,43,660
9,49,349
5,410
78,052
59,42,411
3,61,056
17,346
3,86,449
1,05,796
69,52,388
7,13,947
5,49,003
17,500
72,920
0.93%
0.58%
12.97%
3.77%

Fiscal 2015
4,63,578
48,92,074
36,87,198
3,63,694
8,37,184
3,998
98,460
49,59,290
87,317
39,569
2,76,845
56,091
56,88,441
5,79,297
4,45,959
10,500
62,129
0.95%
0.68%
12.53%
4.04%

Fiscal 2014
357,496
39,48,689
32,29,548
1,59,472
5,56,704
2,965
98,773
39,29,235
1,17,338
27,264
2,13,643
46,667
44,82,207
4,73,756
3,78,258
7,000
52,900
0.78%
0.52%
11.94%
5.22%

Competitive Strengths:
Long track record of leadership in the LMI segment
Diversified funding mix with focused ALM
Healthy asset quality reinforced by strong risk management framework
Strong growth opportunity supported by Government critical policy agenda
Strong Management Team and Corporate Governance
Strategy:
Engage in competitive loan pricing and customize and cross-sell products and services to attract more customers.
Strengthen the IT platform and optimize cost of operations
Conservative Financial Policies
Maintain strong asset quality and earnings growth
Leverage existing network with selective expansion
Risks & Concerns:
Business has been growing consistently in the past. Any inability to maintain growth may have a material adverse effect on its business, results of operations and financial
condition.
Business is particularly vulnerable to volatility in interest rates.
Any increase in the levels of non-performing assets in loan portfolio, for any reason whatsoever, would adversely affect the business, results of operations and financial
condition.
Indebtedness and conditions and restrictions imposed by financing arrangements could adversely affect DHFLs ability to conduct its business and operations.
May experience difficulties in expanding its business into new regions and markets.

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In order to sustain growth, DHFL will need to maintain a minimum capital adequacy ratio. There is no assurance that it will be able to access the capital markets when
necessary in order to maintain such a ratio.
HFC may face the risk of default and non-payment by borrowers. Any such defaults and non-payments would result in write-offs and/or provisions in its financial
statements which may have a material adverse effect on the profitability and asset quality.
DHFL is a listed HFC and is subject to various regulatory and legal requirements. Also, future regulatory changes may have a material adverse effect on its business, results
of operations and financial condition.
DHFL may face maturity mismatches between the assets and liabilities in the future which may cause liquidity issues.
Any decrease in revenue DHFL earns from the distribution of insurance products may have an adverse effect on results of operations.
DHFL may not be successful in its asset management and mutual funds business which could have a material adverse effect on its business, results of operations and
financial condition.
DHFL has entered into tie-ups with commercial banks which may be terminated or may restrict its ability to recover outstanding loans which have been disbursed.
As a HFC, DHFL has significant exposure to the real estate sector and any negative events affecting this sector could adversely affect its business and result of operations.
Growth in profitability depends on the continued growth of loan portfolio.
Any downgrade in DHFLs credit ratings may increase interest rates for refinancing outstanding debt, which would increase its financing costs, and adversely affect the
future issuances of debt and its ability to borrow on a competitive basis.
Business is dependent on relationships with DHFLs clients established through, amongst others, its branches. Closure of branches or loss of its key branch personnel may
lead to damage to these relationships and a decline in its revenue and profits.

RETAIL RESEARCH Fax: (022) 30753435 Corporate Office, HDFC Securities Limited, I Think Techno Campus, Bulding B, Alpha, Office Floor 8, Near Kanjurmarg Station Opp. Crompton Greaves, Kanjurmarg
(East), Mumbai 400 042 Fax: (022) 30753435 Website: www.hdfcsec.com HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475."
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. This document is not to be reported or copied or made available to others. It
should not be considered to be taken as an offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it
should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment banking, or other
services for, any company mentioned in this document. This report is intended for Non-institutional Clients only.
Disclaimer: HDFC Bank (a shareholder in HDFC Securities Ltd) is associated with this issue in the capacity of one of the Bankers to the issue and will earn fees for its services. This report is prepared in the normal
course, solely upon information generally available to the public. No representation is made that it is accurate or complete notwithstanding that HDFC Bank is acting for Dewan Housing Finance Ltd (DHFL). This report
is not issued with the authority of DHFL. Readers of this report are advised to take an informed decision on the issue after independent verification and analysis.

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