9.92% SREI Equipment Finance NCD – July 2017 – Who can invest?

SREI Equipment Finance NCD - July 2017 ReviewSREI Equipment Finance NCD – July 2017 Review


After 6 months, SREI Equipment finance is coming up with NCD’s which which offers upto 9.9% 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.  Last week, Mahindra Finance NCD’s came which offered low interest / yield of 8% per annum. Since SREI Equipment finance is offering high interest rates, this is catching investor attention now. Should we invest in SREI Equipment Finance Secured NCD of July 2017. What are the features of SREI Equipment Finance NCD 2017? What are the risk factors one should consider before investing in such NCDs?

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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.

SREI Equipment Finance NCD July 2017


SREI Equipment Finance is issuing unsecured NCD’s for the tenure of 5 years 3 months, 7 years and 10 years period. Since these are unsecured, investors would not get any preference in case come wind-up due to performance or some other issue.

Features of SREI Equipment Finance NCD – July 2017


  • Start Date: 17-July-2017
  • End date: 31-July-2017
  • NCD’s are available for 5 years 3 months, 7 years and 10 years period.
  • Interest rates are up to 9.55% per annum depending on the series chosen by you. Yield works out to be upto 9.92%.
  • 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 500 Crores with an option to retain another Rs 500 Crores aggregating to Rs 1,00 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 – July 2017?


Interest and Yield details of SREI Equipment Finance NCDs of July 2017

SREI Equipment Finance NCD – July 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.

Also Read: What is Goods and Services Tax (GST) and how does it impact you?

How the company is doing in terms of Financials?


  • Its revenues are on declining mode. Its revenues were at Rs 2619 Crores in FY14 Vs 2,495 Crores in FY17.
  • Profit after Tax (PAT) have reduced from Rs 225 Crores (FY 2014) to Rs 148 Crores (FY 2018) indicating a negative growth. However it has grown from Rs 115 Crores in FY 2016 to 148 Crores in FY17.
  • Net Non Performing Assets (NPA) of the company is 4.07% (FY2014) Vs 1.76% (FY 2017). Net NPA is reduced from 1.99% (FY16) to 1.76% (FY17).

Why to invest?


  • Attractive annualized yield upto 9.92%. Currently banks are offering interest rates of less than 6.5%, hence these are definitely a good option.
  • No TDS if you invest in the demat form.

Why not to invest?


  • Inconsistent growth seen in revenues and profits in last 4 years.  Its revenues are on declining mode. Its profits has been falling from FY14 to FY16. However in FY17 it posted higher profits compared to FY16.
  • These are un-secured NCD’s. Means in case of any non performance of the company and company gets closed, investors would get normal preference  and no special preference given for repayment of principal or interest.
  • 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 its financial statements which may materially and adversely affect profitability and asset quality.
  • Its top 20 borrowers have an exposure of 21.52% of its total exposure as on March 31, 2017. 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 we have a substantial exposure could materially and adversely affect its business, future financial performance and results of operations.
  • Any increase in or realization of our contingent liabilities could adversely affect its financial condition.
  • The financing industry is becoming increasingly competitive and the Company’s growth will depend on its ability to compete effectively.
  • Its business is focused on the infrastructure equipment financing sector, with a particular focus on construction and mining equipment and any adverse economic or regulatory developments in the infrastructure including construction and mining sectors may adversely affect its results of operations. If loans made to borrowers in these sectors become non-performing or there are defaults on such loans, its business, financial condition and results of operations may be materially and adversely affected.

Also Read: Which are the good Term Insurance Plans in India?

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. You can also visit the business associates who are issuing these NCDs. Details can be found at the following links.

Download SREI Equity Finance NCD Prospectus at this link

You can refer SREI corporate presentation here

Conclusion: SREI Equipment Finance NCD of July 2017 are un-secured. Like I always indicated earlier, while we are interested to get higher returns, it is equally important to secure your money. You should look forward to invest in secured NCDs which protects your capital. Investing in unsecured NCDs are very high risk. If you are willing to take such high risk, you can invest in these NCDs. Alternatively you can invest in a good debt mutual fund which still carry some risk, that can provide similar returns.

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Suresh

SREI Equipment Finance NCD – July 2017

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