Sakthi Finance NCD – April 2016 Review
Sakthi Finance Limited has come up with Secured Redeemable Non Convertible debentures (NCD) which offers 11.46% annualized yield. Sakthi Finance NCD has opened up for subscription yesterday 7th April, 2016. Sakthi Finance is an asset finance company with primary focus on financing pre-owned commercial vehicles. How good is Sakthi Finance NCD of April 2016? What are the positive features of Sakthi Finance Non Convertible Debentures (NCD’s) of 2016? What are the risk factors to be considered if you want to invest in Sakthi Finance Limited Secured NCD’s?
About Sakthi Finance Limited
Sakthi Finance Limited is an asset finance company with primary focus on financing pre-owned commercial vehicles. It also provides finance for purchasing infrastructure construction equipment, multi-utility vehicles, cars, jeeps and other machinery. The finances provided are secured by hypothecation of the assets financed.
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Features of Sakthi Finance NCD – April 2016
- Issue start date: 7-April-2016
- Issue end date: 6-May-2016
- NCD’s are available in 8 options.
- Interest payable monthly, annual or at maturity depending on the option of NCD.
- 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. Hence, these are liquid investments.
- NRI’s cannot apply to this NCD subscription.
- NCD ratings ICRA BBB Stable
- Draft Prospectus can be downloaded from SEBI website.
Interest rates of Sakthi Finance NCD – April 2016
How is the company doing in terms of profits?
Its profits are as below:
- Year ended Mar-2011 – Rs 793.59 Lakhs
- Year ended Mar-2012 – Rs 1,161.7 Lakhs
- Year ended Mar-2013 – Rs 1,399.85 Lakhs
- Year ended Mar-2014 – Rs 1,415.73 Lakhs
- Year ended Mar-2015 – Rs 1,584.64 Lakhs
- 6 months ended Sep-2015 – Rs 522.87 Lakhs
Why to invest?
- The company is earning good profits in the last few years. Profits have been increasing year on year, which indicates strong repayment capacity of interest from its profits.
- Good revenue growth story in last 5 years. This indicates company strong capabilities.
- Attractive interest rates of 10.5% per annum. Annualised yield for per month interest option works out to be 11.46%.
- This is secured NCD issue. In case of any non performance of the company and company gets 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?
- Net NPAs as a percentage of loan assets were 0.64%, 0.65%, 0.49% and 0.29% as of September 30, 2015, March 31, 2015, March 31, 2014 and March 31, 2013, respectively which indicates an increase in Net NPA’s over a period of time. Increased NPA’s would wipe-off some of the profits of the company.
- Its promoters and promoter group have received a show cause notice bearing reference number EAD-6/AK/VRP/29297/2014 dated October 8, 2014 from the SEBI for violation of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“SEBI Takeovers Regulations”). Any adverse order by SEBI could affect the ability to conduct business, which would in turn result in a material adverse effect on its business and results of operations.
- This company is involved in a number of legal proceedings and in the event of any or all proceedings being unsuccessful, it may have an adverse effect on the financial conditions of the Company.
- Two other listed group companies, have defaulted in meeting statutory dues and institutional dues. In the event of the statutory authorities/ lenders initiating any action against the group companies and their promoters, the same shall have an impact on the business operation, financial position and reputation of the Company.
- One of the group companies has defaulted in payment to the bond holders of the Foreign Currency Convertible Bonds (FCCB).
- Other Internal and external factors can be read at page no. 13 of the NCD prospectus.
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How to apply these Sakthi Finance NCD of April 2016?
You can apply online to any of the broker where you are maintaining a demat account. You can also directly call Dalmia Securities or SKDC Consultants and fill online form or physical forms. For more information on this you can refer 1st page of the prospectus.
Conclusion: These Sakthi Finance Limited NCD’s are secured in nature and offer high returns on investments. Though it carries some element of risk, they are secured. Several times, I advise investors to park money in securing NCD’s as they are safer compared to unsecured NCD’s. Considering high interest rates and secured NCD’s in nature, once can consider investing in these NCD’s after assessing risk factors indicated above.
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Sakthi Finance NCD – April 2016
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What are other NCD issues going on currently in April, 2016 or upcoming issues in May, 2016 other than muthoot and shakthi?
Please provide an update on this.
What is the Tax implication of this NCD ?
The returns needs to be be added to your income like bank FD and you need to pay income tax based on your slab
Can you redeem these bonds before maturity?
No Amruth. However can be sold on BSE provided if there are buyers.