10.25% SREI Equipment Finance NCD-Apr-2015-Should you invest?
SREI Equipment finance is coming up with secured NCD’s with 10.25% interest rates. SREI Equipment Finance, a joint venture between SREI and BNP Paribas, 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. Can we invest in SREI Equipment Finance Secured NCD of Apr-2015? What are its features and the risks involved in SREI Equipment Finance NCD?
About SREI Equipment Finance Limited
SREI Equipment Finance a joint venture between SREI and BNP Paribas and is 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. Its financial products and services comprise loans, leases, rentals and fee-based services.
SREI Equipment Finance Secured NCD April-2015
SREI Equipment Finance is issuing 3 years, 39 months, 5 years and 7 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 Equipment Finance Secured NCD – April 2015
- Subscription start date: 9-Apr-15
- Subscription end date: 30-Apr-15
- NCD’s are available for 3 years, 3 years 3 months, 5 years and 7 years secured NCD’s tenure.
- Interest rates are up to 10.25% per annum depending on the series chosen by you.
- 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 only. Hence, these are liquid investments.
- Non-resident Indians (NRI’s) cannot invest in these NCD’s.
- The issue size is Rs 2500 Million with an option to retain Rs 2500 Million aggregating to Rs 5000 Million.
- NCD ratings are CARE AAA by CARE and BWR AA by Brickworks credit agency.
Below is the Interest rate chart
SREI Equipment Finance NCD – April 2015 – 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?
- The total consolidated income of the company has grown from Rs 2,374 Crores (FY 2012-13) to Rs 2,619 Crores (FY 2013-14) indicating a growth of 10%.
- Profits (PAT) have reduced from Rs 269 Crores (FY 2012-13) to Rs 225 Crores (FY 2013-14) indicating a negative growth.
- Net Non Performing Assets (NPA) of the company is 2.06% (FY2011-12) Vs 2.25% (FY 2012-13) vs 4.07% (FY 2013-14). However, for the 6 months ended Sep-2014, it is 3.6%.
Why to invest?
- Company is doing good in terms of revenues. However, it showed 10% growth rate in the last financial year of FY 2013-14 compared to an earlier growth rate of 30% in FY 2012-13.
- These are secured NCD’s. Means in case of any winding up of company due to bad performance, investors of NCD would be given preference in repayment of principal and interest compared to other creditors and shareholders. Hence it is safe to invest in such secured NCD’s.
- Attractive annualized yield of 10.25%. Currently banks are offering less than 9% interest rates, hence these are definitely good.
- No TDS if you invest in demat form.
Why not to invest?
- Equipment finance companies are little risky. Means the profits indicated now can reduce in future due to increase in interest rate payments.
- There is a profitability dip in the last financial year 2013-14 compared to previous years. The decline in profits is an indication of negative performance of the company. One should be cautious regarding this. There could be delay in payment of interest in future due to decline in profits.
- Increase in Non Performing Assets (NPA) to 4.07% for FY 2013-14 is a concern.
How to apply?
Majority of the stock brokers who maintains demat accounts are offering the service of FD’s subscription too with small transaction fees. You can directly apply by visiting Edelweiss or Axis bank websites. However, you need to have a demat account for this.
Download SREI presentation from their site on these NCD’s
Conclusion: SREI Equipment Finance Secured NCD of April, 2015 are secured. However, there is a dip in the profits of the company which is considered at risk. Since these trade on BSE, you can exit if required. If you want to park your money for 3 to 5 years time frame and consider taking some risk, you can invest in SREI Equipment Finance NCD of April, 2015 and get good returns.
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SREI Equipment Finance Secured NCD Sep/Oct-2014