Investors eye 10.25% returns as IIFL Finance launches Rs 500 crore NCD offering amid stock market optimism

IIFL Finance Limited has announced its plan to raise up to ₹500 crore through a public issue of secured, rated, and listed non-convertible debentures (NCDs), offering investors a coupon rate of up to 10.25% per annum. The non-banking financial company, headquartered in Mumbai and classified as a middle-layer NBFC by the Reserve Bank of India, intends to use the proceeds from the issue for onward lending, refinancing of existing debt, servicing of current borrowings, and general corporate purposes. The issue opens on April 7, 2025, and is set to close on April 23, 2025, with the potential for early closure based on investor demand.

Structured to include a base issue size of ₹100 crore with a green shoe option of ₹400 crore, the NCD offering totals ₹500 crore. These debentures are designed to appeal to a wide investor base by offering multiple tenors and attractive yields. The highest effective yield of 10.24% per annum is available for a 60-month investment under Series IX. With interest payment options available monthly, annually, or on a cumulative basis, the offering is aligned with the evolving preferences of income-focused investors amid macroeconomic uncertainty.

What do the CRISIL and ICRA ratings indicate for investor safety?

The NCDs have been assigned ‘AA/Stable’ ratings by both CRISIL Ratings Limited and ICRA Limited, two of India’s most respected credit rating agencies. These ratings indicate a high level of safety in terms of timely repayment of principal and interest, with a very low credit risk associated with the instruments. Although credit ratings do not serve as investment advice, they remain a crucial signal for investor confidence, particularly in the debt capital market where risk perception plays a defining role.

CRISIL and ICRA have made it clear that their ratings are based on current information and subject to review, depending on the issuer’s financial health and market conditions. The presence of dual high-grade ratings enhances the appeal of the issue for institutional participants and also reassures retail investors seeking low-risk avenues for fixed returns.

How does this NCD issue align with IIFL Finance’s growth strategy?

The ₹500 crore capital raise fits squarely into IIFL Finance’s long-term strategy to build a diversified, well-capitalised lending platform focused on India’s underpenetrated credit segments. The company has a robust portfolio of retail and MSME lending products, including home loans, gold loans, personal finance, microfinance, and capital market funding. As of December 31, 2024, the company had Assets Under Management (AUM) totalling ₹71,410.19 crore and operated 4,858 branches across the country, supported by a workforce of over 38,000 employees.

IIFL Finance has managed to preserve asset quality despite industry headwinds. Its gross non-performing asset (GNPA) ratio stood at 2.42%, and the net NPA was reported at just 1.01% as of the third quarter of FY25. Approximately 72% of its loan book is secured by physical or financial collateral, which serves to mitigate default risk. By raising long-term capital through this NCD issue, the company is aiming to reduce its reliance on short-term bank funding, enhance liquidity, and manage its asset-liability profile more effectively in a rising interest rate environment.

What are the NCD investment terms, yields, and structure?

The NCDs will be offered in tenors of 15 months, 24 months, 36 months, and 60 months, catering to various investment horizons. Interest payment options include monthly, annual, or cumulative structures, allowing flexibility based on cash flow needs. The highest yield of 10.24% per annum is available under Series IX for a five-year investment, making it particularly attractive for long-term, income-focused investors.

Each NCD will be issued at a face value of ₹1,000, with a minimum application size of ₹10,000. The instruments will be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) to provide post-issuance liquidity, with NSE serving as the designated stock exchange. The lead managers to the issue are Trust Investment Advisors Private Limited, Nuvama Wealth Management Limited, and IIFL Capital Services Limited. It is worth noting that IIFL Capital Services, an associate entity of the issuer, will only be involved in marketing the issue, in accordance with SEBI’s regulatory framework for merchant bankers.

The allotment process will be based on the order of application uploads, meaning that early investors will have a better chance of securing allotment. In the event of oversubscription, proportionate allotment will apply, ensuring transparency and compliance with regulatory norms. Investors are advised to read the full prospectus, including risk disclosures and issue-related information, before making a decision.

How is IIFL Finance performing on the stock market?

IIFL Finance’s shares, listed on both the BSE and NSE under the symbol “IIFL,” have shown resilience and moderate upward movement in recent months. As of April 4, 2025, the stock was trading in the range of ₹475 to ₹490, a gain from levels around ₹455 seen at the beginning of the year. The share price has reflected steady investor confidence, underpinned by stable earnings, sound asset quality, and prudent capital management strategies such as this NCD issuance.

Market sentiment toward the stock remains positive but cautious. Equity analysts have generally maintained a ‘Hold’ to ‘Moderate Buy’ recommendation. The NCD offering is seen as a favourable move, expected to improve liquidity and reduce funding costs, which could enhance net interest margins in upcoming quarters. Investors are watching closely to see how efficiently the company deploys the capital raised, with a particular focus on high-growth segments like MSME and microfinance lending.

For long-term equity investors, IIFL Finance offers a stable NBFC play with potential upside as credit demand in India continues to grow. The company’s performance over the next two quarters will be critical in determining the stock’s trajectory. Analysts suggest that while near-term gains may be modest, the long-term outlook remains constructive provided the macroeconomic environment remains supportive and asset quality does not deteriorate.

Why is now a critical time for IIFL Finance to tap the debt market?

IIFL Finance’s timing for this NCD issuance coincides with increasing investor appetite for fixed-income products, particularly among retail investors seeking stability amid volatile equity markets. With interest rates hovering near cyclical peaks and limited room for further hikes by the Reserve Bank of India, fixed-income products offering high and predictable yields have gained substantial traction. The company’s offering, with yields of up to 10.25%, is well-positioned to meet this demand.

The broader NBFC sector in India has been witnessing double-digit credit growth, driven by rising demand in rural and semi-urban regions, and the formalisation of small enterprises. Against this backdrop, IIFL Finance is leveraging its strong branch network, diversified loan book, and sound underwriting practices to capitalise on growth opportunities. The ₹500 crore raise through secured debentures will allow the company to extend longer-tenor loans and potentially gain market share in segments underserved by traditional banks.

Investor confidence is further reinforced by the company’s successful track record in managing previous NCD issuances, which were oversubscribed and well-received in the secondary market. This legacy of disciplined financial stewardship and transparent governance adds credibility to the current offering. For investors, both equity and debt-focused, the NCD issue offers a compelling opportunity to gain exposure to a stable and growing financial services provider in a rapidly evolving Indian credit landscape.