10.76% SREI Equipment Finance NCD Dec 2018 – Should you invest or avoid?

SREI Equipment Finance NCD Dec 2018 Review


After 9 months, SREI Equipment finance is coming up with NCD’s which offers up to 10.76% 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 April 2018 offered a yield of 9.6% per annum. Since SREI Equipment finance interest rates are high compared to other fixed investment options, it is catching investor attention now. Should we invest in SREI Equipment Finance Secured NCD of Dec 2018? What are the features of SREI Equipment Finance NCD 2018? 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.

Features of SREI Equipment Finance NCD Dec 2018


SREI Equipment Finance is offering Secured, redeemable NCDs as well as unsecured NCDs

Start Date: 19-Dec-2018

End date: 18-Jan-2019

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.

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

It is also issuing unsecured NCDs. If something happens to company performance and it gets wind-up, investors would be treated like any other creditor or investor and no preferential treatment given in repayment of capital or interest.

These NCDs are offered in 9 different options.

Interest rates are up to 10.75% per annum depending on the series chosen by you. Yield works out to be up to 10.76%.

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. Hence, these are liquid investments.

Non-resident Indians (NRI’s) cannot invest in these NCD’s.

The issue size is Rs 150 Crores with an option to retain another Rs 150 Crores aggregating to Rs 300 Crores.

NCD ratings are BWR AA+ (Outlook Stable) by ACUITE AA+/Stable.

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


SREI Equipment Finance NCD Dec 2018-Interest Rates

SREI Equipment Finance NCD Dec 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.

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How the company is doing in terms of Financials?


Let us look at the financials of the company.

1) Its revenues are fluctuating. Its FY16 revenues are at Rs 2614 Crores vs. Rs 2,493 Crores in FY17 Vs Rs 3,309 Crores in FY18.

2) Its profits are on increasing mode. In the last 3 years, its profits are at Rs 115 Crores in FY16 Vs Rs 263 Crores in FY18.

3) Net Non-Performing Assets (NPA) of the company is 1.99% (FY2016) vs. 1.3% (FY 2018) indicating good improvement in this area.

Why to invest?


1) Attractive annualized yield up to 10.76%. Currently banks are offering interest rates of around 7%; hence these are definitely a good option.  Several new NCDs are even offering the highest interest rates now.

2) It offers secure 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 5 years in cumulative investment option, your investment would grow to Rs 1,648 in 5 years.

Why not to invest?


1) Recent IL&FS scam created confusion among investors whether to invest in financing companies in India.

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.

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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 Equipment Finance NCD Prospectus at this link

Conclusion: SREI Equipment Finance NCD of Dec 2018 offers both secured and unsecured NCDs. One should always avoid unsecured NCDs and prefer Secured NCDs. However, even in securing NCDs, 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 windup, 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. However, considering recent IL&FS Scam, it is very high risk to invest in such NCDs now. Investors should be little cautious about this in current scenario.

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Suresh

SREI Equipment Finance NCD Dec 2018

10 Comments

Add a Comment
  1. Dilemma Dilemma Dilemma… Which one to invest among these two NCD in this January, 2019, SREI Infra or Shriram Transport Finance, both for option of 10 years, Annually Interest, and which one is relatively more safe?

  2. i have icici demat account, but it is not listed there. How can i apply for this ?

    1. Go to the IPO section, and then you can apply there, but be fast, tomorrow is the last day for the same

  3. Hello Suresh,
    Tamil Nadu power finance fixed deposit article is dated 2014. Is it still available for investment?
    Can you update please.

    Thanks
    Gowtham

    1. Gowtham, They are still issuing these FD schemes. You can refer this URL for latest info. https://tnpowerfinance.com/depositschemes.aspx

  4. Hello
    Kindly update your old article

    5 Top Rated NCD’s to buy from Secondary Market

    with current date.

    1. Sure Jay. Let me write fresh article on this topic

      1. awaiting for this Suresh !

        1. This is taking some time, pls bear with me

          1. This would be quite useful to everyone. Eagerly waiting to see this list Suresh!

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