SREI Infrastructure Finance NCD-Interest rate upto 11.75%-How safe it is?
SREI Infrastructure finance is issuing secured redeemable Non Convertible Debentures (NCD’s). It comes with 3 years, 5 years and 6.25 years investment period. The interest rates are up to 11.75% per annum. You can double your money in 6 years and 3 months. Can we invest in SREI Infra Finance NCD? What are the features and the risks involved in SREI NCD?
About SREI Infrastructure Finance Limited
SREI Infra finance company primary lends finance to infrastructure projects. It is into equipment finance and project advisory business.
SREI Infrastructure Finance NCD
SREI Infrastructure Finance is issuing 3 years, 5 years and 6.25 years NCD’s. NCD are generally secured. For NCD the assets are backed up for principal and interest. In case unforeseen thing happening to the company, investors of NCD would still get their principal investment and interest.
Features of SREI Infrastructure Finance NCD
- The NCD issue has started from 26-Aug-2013 and would end by 17-Sep-2013.
- NCD’s are available in 3 years, 5 years and 6.25 years period.
- 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 minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
- These NCD bonds would be listed in BSE. Hence these are liquid investments.
- Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
- The issue size is Rs 100 Crores with an option to retain Rs 100 Crores aggregating to Rs 200 Crores.
- NCD ratings are CARE AA- (minus) by CARE and BWR AA by Brick works credit agency.
Below is the Interest rates chart.
SREI Infrastructure Finance NCD – How the returns taxed?
There would not be any TDS deduction on the interest portion.
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 in your income tax return and pay necessary income tax.
How the company is doing in terms of financials?
Revenues of the company has grown from Rs 1,180 Crores (FY 2011-12) to Rs 1,666 Crores (FY 2012-13) indicating a growth of 40%.
Profits increased from Rs 57.96 Crores (FY 2011-12) to Rs 94.96 Crores (FY 2012-13) indicating a profit growth of 64%.
Non Performing Assets (NPA) of the company are 1.58% (FY2011-12) Vs 2.77% (FY 2012-13).
Why to invest?
- Company is doing good in terms of revenues and profits.
- NCD’s are secured. Means in case of any unforeseen thing happening to company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
- Attractive interest rates of 11.16% / 11.50% for 3 years and 11.75% for 5 years / 6.25 years NCD
- Double your money in 6 years 3 months
- No TDS on interest. If your total taxable income is not exceeding taxable limit, you need not worry about TDS deduction and claiming this later on through IT Return.
- Capital adequacy ratio is well above RBI limit and at 21% for FY2013
Why not to invest?
- Infrastructure finance companies are little risky. Means the profits indicated now can reduce in future due to increase in interest rate payments.
- Due to high cost of funding, CARE has downgraded its rating to CARE AA- (minus) during Nov-2012.
How to apply?
Majority of the stock brokers who maintain demat accounts are offering the service. You can also directly apply through ICICI Securities or Karvy securities. However you need to have demat account for this.
Conclusion: SREI Infra Finance NCD’s are secured. While there is element of risk with downgrading of credit rating, you can invest in such investment options and get high returns. Since these are traded on stock exchanges, you can also exit if required. If you want to park your money for 3 to 6 years time frame and consider taking some risk, you can invest in SREI Infra Finance NCD and get good returns.
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SREI Infrastructure Finance NCD