9.6% SREI Equipment Finance NCD April 2018 – Who can invest?

SREI Equipment Finance April-2018 Secured NCD ReviewSREI Equipment Finance NCD April 2018 – Who can invest?


After 10 months, SREI Equipment finance is coming up with NCD’s which offers up to 9.6% 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 time, SREI Equipment Finance NCD’s that came in 2017 offered yield of 9.9% per annum. Since SREI Equipment finance interest rates are still high now compared to others fixed investment options, it is catching investor attention now. Should we invest in SREI Equipment Finance Secured NCD of April 2018? What are the features of SREI Equipment Finance NCD 2018? What are the risk factors one should consider before investing in such NCDs?

Also Read: Shriram Transport Finance FD Scheme offers 10% Interest – Should you invest?

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.

Features of SREI Equipment Finance NCD April 2018


SREI Equipment Finance is offering Secured, redeemable non-convertible debentures.

Start Date: 25-April-2018

End date: 16-May-2018

Allotment on first come first serve basis. Means, if there is huge demand, these would get subscribed on day-1 itself.

NCD’s are available for 400 days, 3 years, 5 years and 10 years.

These are Secured NCDs. Means is something happens to company performance and it gets wind-up, investors would be still given preference in repayment of capital and interest.

These NCDs are offered in 11 different options.

Interest rates are up to 9.6% per annum depending on the series chosen by you. Yield works out to be up to 9.6%.

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 1,000 Crores.

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

Download SREI Equipment Finance NCD Prospectus at this link

What are the interest rates on SREI Equipment Finance NCD April 2018?


Interest rates of SREI Equipment Finance April-2018SREI Equipment Finance NCD April 2018 – 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?


Its FY2018 financials are not yet available, hence let’s review its previous year financials.

1) Its revenues are on declining mode. Its revenues were at Rs 2619 Crores in FY14 vs. 2,495 Crores in FY17.

2) 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.

3) 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). It’s Net NPA for 9 months ended Dec-2017 was 1.36%.

Why to invest?


1) Attractive annualized yield up to 9.6%. Currently banks are offering interest rates of less than 6.5%; hence these are definitely a good investment option.  Recently SBI has hiked some its interest rates. Several new NCDs are even offering highest interest rates now.

2) It offers secured NCDs which are relatively low risk compared to non-secured NCDs.

3) No TDS if you invest in the demat form.

4) If you invest Rs 1,000 for 10 years cumulative investment option, your investment would grow to Rs 2,503 in 10 years.

Why not to invest?


1) Inconsistent growth seen in revenues and profits in last 4 years.  Its revenues are on declining mode. Its profits have been falling from FY14 to FY16. However in FY17 it posted higher profits compared to FY16.

2) Outstanding litigations pending against the company.

3) 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 non-payments would result in write-offs and/ or provisions in its financial statements which may materially and adversely affect profitability and asset quality.

4) Its top 20 borrowers have an exposure of 11.68% 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.

5) Any increase in or realization of our contingent liabilities could adversely affect its financial condition.

6) The financing industry is becoming increasingly competitive and the Company’s growth will depend on its ability to compete effectively.

7) 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: Top 10 Mutual Funds to invest in 2018

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.

Conclusion: SREI Equipment Finance NCD of April 2018 is secured. However, one should note that there is no guarantee that investors would get back their capital and interest. It is only these are secured and in case of non-performance of the company and it gets wind-up, there are higher chances that they would get back their money. Hence, it is relatively safer to invest in Secured NCDs compared to Unsecured NCDs. If you want to get higher returns and willing to take some risk, you can park some of your investments in such high return investment options.

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Suresh

SREI Equipment Finance NCD April 2018

9 comments

  • ATUL

    GOOD ,
    Give me BSE Code Number of srei NCD , Plan 5 Years Annul.

  • Anupam Sinha

    Is demat A/C is necessary to buy Bonds? and what will the return if I choose 3 yr plan?

    Thanks

    • If you want to sell them before maturity, demat is the best option. 3 year plan is linked to mibor rate, hence it may fluctuate slightly otherwise the returns are as indicated in the table

  • Raghavendra

    Please tell about earning after post taxation if I invest for one year 

    Would I be able to sell it after 6 -12 months 

  • Jacob Mendonsa

    Please call me urgently to advisr as to why U refunded my matured amount instead of reinvesting it.
    Please treat it as very urgent.
    Jacob Mendonsa
    Juliet Irene Mendonca

  • Jayesh

    Can You please explain the difference between Coupon Rate and Effective Yield ? Which one of them should i refer for returns and tax-planning ????

    • Hi Jayesh, Coupon rate is interest rate. However yield is nothing but the interest received over the period dividend by no. of year. e.g. If you invested Rs 1 Lakh @ 9% per annum interest for 9 years. for 1st year, it is Rs 9,000, but second year, you would get interest on capital + 1st yaer interest i.e. Rs 1 Lakh + Rs 9,000 = Rs1.09 Lakhs @ 9% = Rs 9,810. This would increase year on year as you are getting interest every year. Hence yield would be always higher as it is calcualted based on what you are getting at end divided by no. of years of investment.

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