12% SREI Infra Finance Secured NCD, May-2014
SREI NCD May-2014 – Can we buy?
After 4 months, SREI Infrastructure finance limited again comes back with secured NCD’s offering 11.4% and 12% interest rates. It comes with 3 year and 5 year investment period. Generally, all NCD’s come with 6 to 7 year investment period. However SREI Infra Finance NCD of May/Jun-2014 comes with medium term of 3 to 5 years. Can we invest in SREI Infra Finance Secured NCD of May-2014, what are its features and the risks involved in SREI NCD? Is there any change in company performance from our earlier review ? Does it effect your investment decision now ?
About SREI Infrastructure Finance Limited
SREI Infrastructure finance primary lends finance to infrastructure projects. It is into equipment finance and project advisory business.
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SREI Infra Finance Secured NCD, May-2014
SREI Infrastructure Finance is issuing 3 years and 5 years secured NCD’s. For secured 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 Infra Finance Secured NCD, May-2014
- Start Date: 9-May-2014
- End date: 9-Jun-2014
- NCD’s are available in 3 years and 5 year tenure.
- Interest rates are up to 12% per annum depending on the series chosen by you.
- There would be 0.25% extra interest paid to existing customers and existing share holders.
- 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.
- The issue size is Rs 750 Million with an option to retain Rs 750 Million aggregating to Rs 1500 Million.
- NCD ratings are CARE AA- (double A minus) by CARE and BWR AA by Brickworks credit agency.
Below is the Interest rate chart.
SREI Infra Finance Secured NCD, May-2014 – 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 in your income tax return and pay necessary income tax.
How the company is doing in terms of Financials?
- The total consolidated income of the company has grown from Rs 2,446 Crores (FY 2011-12) to Rs 3,110 Crores (FY 2012-13) indicating a growth of 27%. Total income for the 6 months ended Sep-2013 are Rs 1,604 Crores.
- Profits increased from Rs 111 Crores (FY 2011-12) to Rs 263 Crores (FY 2012-13) indicating a profit growth of 136%. However, profits are at Rs 88 Crores for 6 months ended Sep-2013. Even we assume that annualized numbers would be Rs 176 Crores, this is far less than last year profit.
- Non Performing Assets (NPA) of the company are 1.58% (FY2011-12) Vs 2.77% (FY 2012-13). Current year numbers yet to be known.
Why to invest?
- Company is doing good in terms of revenues.
- 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.
- These NCD carry attractive annualized yield of 12%.
- No TDS if you invest in demat form.
- The capital adequacy ratio is well above RBI limit and at 21% for FY2013 (last year). Current year numbers are yet to be known.
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 the high cost of funding, CARE has downgraded its rating to CARE AA- (minus) during Nov-2012. In future such instance can arise.
- There is a profitability dip in 6 months ended Sep-2013 compared to previous year. One should be cautious regarding this.
How to apply?
You can login to your demat account and click on NCD section and apply from your demat and trading account. In case you want to apply through manual paper work, visit the SREI website and follow the manual application process.
Conclusion: SREI Infra Finance NCD's of May-2014 are secured. There is an element of risk about a dip in the projected performance of the company. Since these are traded on BSE/NSE, you can exit if required. However the bond value could be low due as it would depend on market demand. If you want to park your money for 3 to 5 years time frame and consider taking some risk, you can invest in SREI Infra Finance NCD of May 2014 to get good returns.
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SREI Infra Finance Secured NCD, May-2014