9.7% SREI Equipment Finance NCD Jan-2017 – Should you invest?

SREI Equipment Finance NCD Dec,Jan-2017SREI Equipment Finance NCD Dec/Jan-2017


After 1 year and 9 months, SREI Equipment finance is coming up with secured NCD’s which offers 9.77% yield. SREI Equipment Finance is one of the leading non-banking financing companies in the organized equipment financing sector in India with a principal focus on financing infrastructure equipment.  Should we invest in SREI Equipment Finance NCD of Jan 2017. What are the features of SREI Equipment Finance NCD 2017? What are the risk factors one should consider before investing in SREI Equipment NCDs?

About SREI Equipment Finance Limited


They are one of the leading non-banking financing companies in the organized equipment financing sector in India with a principal focus on financing infrastructure equipment. They are registered with the RBI as a non-deposit taking systemically important, non-banking financial company (NBFC). They provide financial products and services to companies operating in the construction, mining, technology and solutions, healthcare, ports and railways, oil and gas, agriculture and transportation sectors. Our financial products and services comprise loans, leases, rentals and fee-based services.

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SREI Equipment Finance NCD Jan 2017


SREI Equipment Finance is issuing 400 days, 3 years and 5 years secured NCD’s. For secured NCD, the assets are backed up for principal and interest. In case company do not perform well and gets closed, investors of NCD would still get their principal investment and interest.

Features of SREI Equipment Finance NCD – Jan 2017


Start Date: 3-Jan-2017

End date: 20-Jan-2017

Secured NCD’s are available for 400 days, 3 years and 5 years tenure.

Interest rates are up to 9.75% per annum depending on the series chosen by you. Yield works out to be upto 9.77%.

Interest payable monthly, annually or at maturity depending on the series of NCD.

Face value of the bond is Rs 1,000.

Minimum investment is for 10 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 and NSE. Hence, these are liquid investments.

Non-resident Indians (NRI’s) cannot invest in these NCD’s.

The issue size is Rs 250 Crores with an option to retain another Rs 250 Crores aggregating to Rs 500 Crores.

NCD ratings are BWR AA+ (Outlook Stable) by Brickworks and SMERA AA (Stable) by SMERA credit agencies.

What is the interest on SREI Equipment Finance NCD Jan 2017?


SREI Equipment Finance NCD - Jan 2017 - Interest Chart

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SREI Equipment Finance NCD – Jan 2017 – How the returns taxed?


There would not be any TDS deduction on the interest portion if you have applied through demat account.

Income tax on interest would be based on individual tax slab. Means, irrespective of whether company deducts TDS or not, you should show the interest income on your income tax return and pay necessary income tax.

How the company is doing in terms of Financials?


No revenue growth in the last couple of years. Its revenues were at Rs 2619 Crores in FY14 Vs 2615 Crores in FY16.

Profit after Tax (PAT) have reduced from Rs 225 Crores (FY 2014) to Rs 115 Crores (FY 2016) indicating a negative growth.

Net Non Performing Assets (NPA) of the company is 3.83% (FY2015) Vs 1.99% (FY 2016). Further Net NPA has been reduced to 1.87% for the 6 months ended Sep-2016.

Why to invest?


Company is doing good in terms of revenues. However, its revenues are stable and no growth in last 3 years.

These are secured NCD’s. Means in case of any unforeseen thing happening to companies, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.

Attractive annualized yield of 9.77%. Currently banks are offering interest rates of less than 6.5%, hence these are definitely a good option.

No TDS if you invest in demat form.

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Why not to invest?


Its profits are in declining mode. Its profits for FY14 was Rs 225 Crores, FY15 was Rs 153 Crores and FY16 was Rs 115 Crores. Declinig in profits indicate a negative sign. Company may not be able to pay interest on time in future with reducing profits.

There are outstanding legal proceedings involving Company, Promoter and Directors. Any adverse outcome in such legal proceedings may affect its business, results of operations and financial condition.

As an NBFC, the risk of default and non-payment by borrowers and other counterparties may materially and adversely affect its profitability and asset quality. Any such defaults and nonpayments would result in write-offs and/ or provisions in the financial statements which may materially and adversely affect its profitability and asset quality.

Its top 20 borrowers have an exposure of 22.21% of its total exposure as on March 31, 2016. Its inability to maintain relationship with such customers or any default and non-payment in future or credit losses of its single borrower or group exposure where they have a substantial exposure could materially and adversely affect its business, future financial performance and results of operations.

Any increase in or realization of company contingent liabilities could adversely affect its financial condition.

Company may not be able to appropriately assess the credit worthiness of its customers before extending credit facilities to them. Unavailability of adequate information or inaccurate and/or incomplete information provided by its customers may adversely affect its operations and profitability.

As an NBFC, they have to adhere to several regulatory norms prescribed by RBI from time to time. Any non-compliance with such norms or any adverse change in the norms could negatively affect its Company’s operations, business and financial condition.

How to apply?


If you have demat account, you can login to your account, go to FD/NCD section and apply with a single click. Alternatively you can visit Edelweiss website and download application form and apply the same.  

Download SREI Equity Finance NCD Prospectus at this link

Conclusion: SREI Equipment Finance Secured NCD of Jan, 2017 are secured. However, there is a dip in the profits of the company in the last few years which is considered as major risk. Since these NCD would trade on BSE/NSE, you can exit if required. If you want to park your money for 3 to 5 years time frame and consider taking high risk, you can invest in SREI Equipment Finance NCD of Jan 2017.

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Suresh

SREI Equipment Finance NCD Dec/Jan-2017

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