Indiabulls Financial Services announced the closure of its qualified institutional placement issue on August 27. Contrary to news reports which pegged the amount raised at Rs 1,280 crore, the company raised an aggregate of Rs 650 crore through the issue of non-convertible debentures and Rs 13.8 crore as margin money on allotment of warrants, linked to the debenture issue.
The company issued two sets of debentures. It raised Rs 550 crore through the issue of 5-year NCDs which will pay interest at 10% per annum. The second set, through which it raised Rs 100 crore, will mature in 18 months and will pay an interest of 8.9%. It also issued warrants to the 10% NCD holders, requiring an upfront payment of Rs 5 per warrant which will entitle them to apply for shares at Rs 225 each.
Thus, the total amount it has raised through the issue is Rs 664 crore and when the warrants are converted into equity shares, it will get Rs 619 crore, taking the total amount raised to Rs 1,283 crore. Indiabulls’ share price is Rs 138 and it is unlikely that the warrant holders would want to exercise their option at this juncture.
Indiabulls’ revenues in the June 2010 quarter were Rs 471 crore and its net profit was Rs 133.6 crore, rising by 10% and 42% compared to the previous quarter. Its primary source of income is from lending and is focusing more on the home loans segment. Its loans assets were Rs 12,535 crore as of June 2011 with nearly half in mortgages, 25% to corporates, 14% to small and medium enterprises and the rest equally divided between commercial vehicle and personal loans. It is attempting to reduce its reliance on bank funding, by raising more money from long term debentures. The current issue appears to be a part of its fund raising strategy.