These Sakthi Finance NCDs of June, 2021 issue offer 13.6% Yield – Should you Invest?

Sakthi Finance NCDs of June, 2021 - Issue Details, Interest rates and Risk FactorsSakthi Finance NCDs of June, 2021 issue details

After 15 months, Sakthi Finance is coming up with Secured and Un-Secured NCDs now. Sakthi Finance NCD Issue opens on 29th June, 2021 and closes on 28th July, 2021. These Sakthi Finance NCDs offer up to 13.6% yield. It is issuing 26 months to 61 months tenure NCDs. When interest rates are low, high interest rate NCDs from Sakthi Finance would definitely attract investors who want to invest for short term to medium term. Should you invest in Sakthi Finance NCDs of June / July, 2021? What are the risk factors one should consider before investing in such high risk NCDs?

Also Read: Adhibhan Nidhi FD offers 11.5% interest rates – Is it safe?

About Sakthi Finance Limited

They are an asset finance company with primary focus on financing pre-owned commercial vehicles. They also provide finance for purchasing infrastructure construction equipment, multi-utility vehicles, cars, jeeps and other machinery. The finances provided are secured by lien on the assets financed. Its target customers predominantly comprise Small / Medium Road Transport Operators and primarily hail from rural / semi-urban area.

What are NCD Bonds?

If you want to more about NCD bonds, you can view this video.

Features of Sakthi Finance NCD Bonds of June / July , 2021

Sakthi Finance NCDs would open for subscription on Tuesday, 29th June, 2021 and closes on Wednesday, 28th July, 2021.

These are issued on first come first serve basis, hence the issue can get closed once it is fully subscribed.

These NCD’s are available in 8 different options. It offers NCD for 26 months to 61 months tenure NCDs.

Interest rates are between 9.5% to 10.5%. Yield works upto 13.64%.

They are offering secured NCDs and Un-Secured NCDs now.

Interest payable every month and on a cumulative basis depending on the option chosen by the investor.

The face value of the NCD bond is Rs 1000.

Minimum investment is for the 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/NSE. Hence, these are liquid investments.

NRI’s cannot apply to this NCD subscription.

ICRA has rated these NCDs as BBB (Stable) which indicates a moderate degree of safety regarding timely servicing of financial obligations and carry a moderate credit risk.

The base issue size is Rs 100 Crores with an option to retain over-subscription up to Rs 100 Crores totaling to Rs 200 Crores.

Dalmia Securities is the Lead manager to the issue.

Sakthi Finance June-2021 symbol is SFL-05.

Sakthi Finance NCD June, 2021 Prospectus link

What are the interest rates on these NCDs?

Here are the interest rates and coupon rates on these NCDs.

Sakthi Finance NCD June-July-2021 - Interest Rates and Yield-updated

How the current NCD issue is allocated to various investors?

1) Retail Portion – 50% of the issue

2) Non-Institutional Portion – 45% of the issue

3) Institutional Portion – 5% of the issue

What are the credit ratings for these NCDs?

Sakthi Finance NCDs are rated by ICRA as BBB (Stable) which indicates a moderate degree of safety regarding timely servicing of financial obligations and carry a moderate credit risk.

When these NCDs are proposed to be listed on stock exchanges?

The NCDs are proposed to be listed on BSE. The NCDs shall be listed within 6 working days from the date of the issue cosure.

Company Financials

Here are the financials:

1) Its revenues were at Rs 168.04 Crores for FY2019 Vs Rs 170.2 Crores for FY2020. Its FY2021 results are not yet available.

2) Its profits were at Rs 9.57 Crores for FY2019 Vs Rs 11.17 Crores for FY2020.

3) Net NPA is at 2.12% in FY2019 Vs 2.6% for FY2021.

How interest received is taxed in Sakthi Finance NCD?

For investors who are applying through demat account, there would not be TDS deduction.

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.

Why to invest?

Here are the few reasons to invest in these NCDs.

1) Sakthi Finance is leading NBFC company in India.

2) These NCDs offer attractive interest rates where you can get yield up to 13.6% per annum.

3) It issues both secured and un-secured NCDs. Let us talk about their secured NCD issue. In case of any non performance of the company and the company gets wind-up / closed for some reason, NCD investors would get preference in repayment of capital along with interest. Hence it is safe to invest in such secured NCD options. However, it is only preference is given to NCD investors and no guarantee that entire amount would be paid-back in such cases.

Why not to invest in Sakthi Finance NCD June, 2021?

Here are some negative / risk factors of investing in NCDs.

1) Impact of Covid-19 pandemic on its business is uncertain and cannot be predicted.

2) Company is involved in certain legal proceedings. If any adverse outcome of any such proceedings can affect the performance of the company.

3) Company promoter directors and promoter directors of the group company, whose liabilities to some of its creditors are in default. Any adverse action by those creditors can affect financial condition of its promoter directors.

4) Company promoter directors and promoters of group company in which two of their creditors have filed petitions before debt recovery tribunal for recovery of dues. Any adverse outcome can affect the financials of the promoter directors which can impact the company’s business.

5) Company have been subject to RBI inspection and any adverse findings may affect its business and opertations.

6) Other Internal and external factors can be read at the risk factors of the NCD prospectus.

You may like: Which are the safe investments with high returns in India?

How to apply these Sakthi Finance NCD June, 2021?

Sakthi Finance NCD Issue of June, 2021 is available only in demat form. You can apply online by visiting your demat account login. For more information on this you can refer prospectus.

Should you invest in Sakthi Finance NCD June, 2021?

Company offers secured and un-secured NCDs which offer high interest rates. Secured NCDs are little safer compared to unsecured NCDs. However, company has low credit ratings of BBB from ICRA. Investing in low credit rating company would be high risk as such credit ratings can always fall further in future without any notice. Investors should be cautious and consider all these risk factors before investing in such high risk NCDs.

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Suresh KP

10 comments

  • Dharmalingam

    Sakthi finance 2021 July NCD, when we will get returns.

  • Selvakumar Karuppiah

    Is investing in Sakthi finance for 4 years is safe and can be done or to be avoided.

  • SRIDHARAN

    A fairly analysed. Only risk is the consequence of the litigation against the directors.
    Would you recommend to apply for UNSECURED NCDs since yield is high?
    Keep mailing.
    Regards
    V.sridharan

    • Sridharan, This depends on your risk appetite. If you are high risk taker and okay with the risks indicated here, you can invest. If you are high risk taker, but considering NBFC’s situation today and investing in unsecured NCDs is beyond your risk tolerance, you can avoid them

  • Manoj

    Suresh,

    Forgive me if this is a silly question , but why is the coupon rate for 49 months given as NA?

    Manoj

    • Hello Manoj, Not at all. You can put your queries. Companies would not provide coupon rate for cumulative option e.g. for 49 months cumulative the coupon rate is NA, however yield is given. Yield is nothing but how much money you would get every year even considering compounding etc. It would be simpler for investors to understand this yield instead of saying a coupon rate and then indicating whethr it would be compounded or not, if yes again, is it yearly or quarterly (banks generally do quarterly compounding).

      In this case 12.17% yield means, if you are investing Rs 1 Lakh, you would get Rs 12,170 every year considering all these aspects.

  • Sudhir Mohan

    Hi,me subscribed this news letter some two years ago,n act periodically on the quality base advise,by KP Sir,I think in these time ,only KP can dare to advance n furnish true financial advise.Keep it up.Thank You.

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