12% Sakthi Finance Secured NCD Feb / Mar-2015 Review

Sakthi Finance NCD Feb, Mar 201512% Sakthi Finance Secured NCD Feb / Mar-2015 Review

Tamilnadu based, Sakthi Finance Limited is coming up with Secured Non Convertible debentures (NCD) which offers 12.01% annualized yield. Sakthi Finance NCD has opened up for subscription on 27th Feb, 2015. Sakthi Finance is an asset finance company with primary focus on financing pre-owned commercial vehicles. How good is Sakthi Finance NCD’s? What are the positive features of Sakthi Finance Non Convertible Debentures (NCD’s)? What are the risk factors to be considered if you want to invest in Sakthi Finance Limited Secured NCD’s?

About Sakthi Finance Limited

Sakthi Finance Limited is an asset finance company with primary focus on financing pre-owned commercial vehicles. It also provide finance for purchasing infrastructure construction equipment, multi-utility vehicles, cars, jeeps and other machinery. The finances provided are secured by hypothecation of the assets financed. The company is one of the leading non-banking finance company with over 43 branches in Tamilnadu, Kerala, Karnataka and Andhra Pradesh. The company has positioned itself as a niche player by introducing refinancing for commercial vehicles and construction equipments.

Features of Saskthi Finance Secured NCD Feb/Mar-2015

  • Issue start date: 27-Feb-2015

  • Issue end date:19-Mar-2015

  • NCD’s are available in various options.

  • Interest payable monthly, annual or at maturity depending on the option of NCD.

  • Face value of the NCD bond is Rs 100.

  • Minimum investment is for 100 bonds. Means, you need to invest for a minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.

  • These NCD bonds would be listed on BSE. Hence, these are liquid investments.

  • NRI’s cannot apply to this NCD subscription.

  • NCD ratings ICRA BBB Stable

  • Draft Prospectus can be downloaded from its website here

Below are the Interest rates details.

Sakthi Finance NCD Feb,Mar-2015-Interest rates

How is the company doing in terms of profits?

Its profits are as below:

Year ended Mar-2010 – Rs 628.18 Lakhs

Year ended Mar-2011 – Rs 793.59 Lakhs

Year ended Mar-2012 – Rs 1,161.7 Lakhs

Year ended Mar-2013 – Rs 1,399.85 Lakhs

Year ended Mar-2014 – Rs 1,415.73 Lakhs

6 months ended Sep-2014 – Rs 731.64 Lakhs

Why to invest in Sakthi Finance NCD Feb/Mar-2015?

  • Company is earning good profits in the last few years. Profits have been increasing year on year which indicates strong repayment capacity of interest from its profits.
  • Good revenue growth story in last 5 years. This indicates company strong capabilities.
  • Attractive interest rates of 11.5% per annum. Annualised yield for per month interest payment works out to be 12.01%.
  • This is secured NCD issue. In case of any non performance of company and company gets closed for some reason, NCD investors would get preference in repayment of capital along with interest. Hence it is safe to invest in such secured NCD options. However, it is only preference is given to NCD investors and no guarantee that entire amount would be paid-back in such cases.

Why not to invest  in Sakthi Finance NCD Feb/Mar-2015

  • Net NPAs as a percentage of loan assets were 0.58%, 0.49%, 0.29% and 0.23% as of September 30, 2014, March 31, 2014, March 31, 2013 and March 31, 2012 respectively which indicates increase in Net NPA’s over a period of time. Increased NPA’s would wipe-off some of the profits of the company.

  • Its promoters and promoter group have received a show cause notice bearing reference number EAD-6/AK/VRP/29297/2014 dated October 8, 2014 from the SEBI for violation of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“SEBI Takeovers Regulations”). Any adverse order by SEBI could affect the ability to conduct business, which would in turn result in material adverse effect on its business and results of operations.

  • This company is involved in number of legal proceedings and in the event of any or all proceedings being unsuccessful, it may have an adverse effect on the financial conditions of the Company.

  • Two other listed group companies, have defaulted in meeting statutory dues and institutional dues. In the event of the statutory authorities/ lenders initiating any action against the group companies and their promoters, the same shall have an impact on the business operation, financial position and reputation of the Company.

  • One of the group companies has defaulted in payment to the bond holders of the Foreign Currency Convertible Bonds (FCCB).

  • Decline in its capital adequacy ratio could restrict future business growth.

How to apply?

You can apply online with any of the broker where you are maintaining a demat account. You can also directly call Sakthi Finance company and fill online form or physical forms.

Conclusion: These Sakthi Finance Limited NCD’s are secured in nature. Though it carries some element of risk, they are secured. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. Considering high interest rates and secured NCD’s in nature, once can consider investing in these NCD’s after assessing risk factors indicated above.  

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Sakthi Finance Secured NCD Feb / Mar-2015 Review

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