12.77% Sakthi Finance NCD – April 2022 – Issue Details and Review
Sakthi Finance is coming up with secured NCD bonds now. These bonds would open for subscription on 11th April, 2022. Sakthi Finance is the investment and credit company with a focus on financing pre-owned commercial vehicles. The interest rates for Sakthi Finance NCD are up to 10% and yield works up to 12.77%. These NCDs are offered for 24 months to 60 month tenure. Interest is paid either monthly or on maturity. Should you invest in Sakthi Finance NCD issue of April, 2022? What are the risk factors one should consider before investing in Sakthi Finance upcoming NCD 2022?
About Sakthi Finance Limited
Company is an Investment and Credit 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. The SRTOs / MRTOs looks for speedy disposal of finance at competitive rates. Company have identified this opportunity and positioned itself between the organized banking sector and local money lenders by offering the finance at competitive rate with flexible and speedy lending services to its customers.
Sakthi Finance NCD issue details (April-2022)
Sakthi Finance NCD opens on Monday, 11th April, 2022 and closes on Wednesday, 4th May, 2022.
NCD’s are available in 8 different options. The tenures for these NCDs are for 24 months, 36 months, 48 months and 60 months.
Coupon interest rates for all categories of investors are between 8.5% to 10%. Yield on these NCD bonds works out up to 12.77%.
These are secured NCDs.
Interest is payable monthly or on maturity depending on the option chosen by the NCD investor.
Sakthi Finance NCD Price per bond is Rs 1,000.
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 bonds would be listed on BSE within 6 working days from the issue closure date.
These are allotted on first come first serve basis. Hence the issue can be closed before this date if it is oversubscribed before the closure date.
NRI’s cannot apply to this NCD subscription.
Sakthi Finance NCD base issue size is Rs 50 Crores with an option to retain for another Rs 50 Crores totalling to Rs 100 Crores.
Dalmia Securities is the lead manager for the issue.
Sakthi Finance NCD Interest Rates – April-2022 Issue
What are the credit ratings for these NCDs?
ICRA assigned Sakthi Finance NCD rating as BBB (Stable). Instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
How is the company doing in terms of profits?
Its profits are as below:
FY2020 – Rs 11.19 Crores
FY2021 – Rs 9.25 Crores
6 Months ending Sep-21 – Rs 5.25 Crores
Why to invest in these NCDs?
1) Sakthi Finance NCD’s offer attractive interest rates where investors can get interest up to 10% and yield up to 12.77% per annum.
2) While Sakthi Finance profits are slightly fluctuating, it generates consistent margins. This means that company has ability to pay interest payment on time to its NCD holders without any delay.
3) It issues secured NCDs. Its secured NCDs are safe compared to unsecured NCDs. In case company gets wind-up/shut down for some reason, secured NCD investors would get preference in repayment of capital along with interest as those backed up by assets of the company. Hence it is safe to invest in such secured NCD options.
Why not to invest in these NCDs?
1) The Spread of COVID-19 pandemic and the consequent nationwide lockdowns and covid restrictions have impact on its operations and financial condition. Any covid related restrictions or lockdowns in the future would have an impact on company business.
2) Company is involved in certain legal proceedings. Any adverse outcome can affect company performance.
3) One of the group company has defaulted payment to the bond holders of FCNRs.
4) Company credit rating is BBB (Stable) from ICRA, which is considered as low. There are high chances that companies with low credit rating can default the payments in the future.
5) Refer NCD prospectus for complete risk factors.
How to invest in Sakthi Finance NCD Online?
This issue is available in only in demat form. You can apply online or through any of the broker website where you are maintaining a demat account. Application forms can be downloaded on the lead manager web site. For more information on this you can refer prospectus.
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How safe is Sakthi Finance NCD?
These NCD bonds are rated as BBB (Stable) by ICRA. Such credit rating carries moderate credit risk. Such ratings are considered as low ratings and its riskier to invest in such NCD bonds.
Should you invest in Sakthi Finance NCD?
Sakthi Finance NCD of April-2022 issue offers high interest rates and yield. These NCDs are rated as BBB (Stable) by ICRA, which are considered as low rating. Even these credit ratings can change in future without any notice. The company indicated in the NCD prospectus that its group companies has delayed the payments to FCNR investors and to several other creditors. While these are secured NCDs these bonds are very high risk considering above risk factors. Unless investors understand all these risk factors and may still want to invest, otherwise they can stay away from such NCD bonds.
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