Sakthi Finance is coming up with secured NCD bonds now which can double investors’ money in 85 months. These bonds would open for subscription on 17th April and closes on 28th April, 2023. 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 10.25% and yield works up to 14.3%. These NCDs are offered for 24 months to 85 month tenure. Interest is paid either monthly or on maturity depending on the NCD option. Should you invest in Sakthi Finance NCD issue of April, 2023? What are the risk factors one should consider before investing in Sakthi Finance NCD 2023?
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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 – April-2023
| Opening Date | 17-Apr-23 |
| Closure date | 28-Apr-23 |
| Security Type | Secured, Redeemable and Non-Convertible NCDs |
| Issue Size (Base) | Rs 100 Crores |
| Issue Size (Oversubscription) | Rs 100 Crores |
| Total Issue Size | Rs 200 Crores |
| Issue price | Rs 1,000 per bond |
| Face value | Rs 1,000 per bond |
| Minimum Lot size | 10 bonds and 1 bond there after |
| Tenure | 24 to 85 months |
| Interest Payment frequency | Monthly or on maturity |
| Listing on | Within 6 working days on BSE/NSE |
Sakthi Finance NCD Interest Rates – April-23 Issue
| Options | I | II | III | IV | X | VI | VII | VIII | IX |
|---|---|---|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Monthly | Cumulative | Monthly | Cumulative | Monthly | Cumulative | Monthly | Cumulative | Cumulative |
| Tenor (in months) | 24 | 24 | 36 | 36 | 48 | 48 | 60 | 60 | 85 |
| Coupon (% per Annum) | 9.00% | NA | 9.25% | NA | 9.50% | NA | 10.25% | NA | NA |
| Effective Yield (% per Annum) | 9.00% | 9.74% | 9.25% | 10.52% | 9.50% | 11.40% | 10.25% | 13.17% | 14.30% |
| Amount on Maturity (In Rs.) | 1,000 | 1,194 | 1,000 | 1,315 | 1,000 | 1,455 | 1,000 | 1,658 | 2,013 |
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 11.17 Crores
FY2021 – Rs 9.25 Crores
FY2022– Rs 9.51 Crores
6 Months ending Sep-22 – Rs 5.88 Crores
Why to invest in these NCDs?
1) Sakthi Finance NCD’s offer attractive interest rates where investors can get interest up to 10.25% and yield up to 14.3% per annum.
2) While Sakthi Finance profits are slightly fluctuating, it generates consistent margins. Investing in companies that are generating consistent margins reduces the default risks.
3) It issues secured NCDs. In case a 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) Sakthi Finance NCD credit rating is BBB (Stable) from ICRA, which is considered as low rating. There are high chances that companies with credit rating below “A” rating can default the payments in the future.
2) Sakthi Finance operates in increasingly competitive financial services industry that creates significant pricing pressure and adversely affect its interest margins and income.
3) The company is involved in certain legal and other proceedings which, if determined against them, could have a material adverse impact on financials.
4) One of its promoter Group companies has defaulted in payment of interest and principal dues to one of its creditors. Any adverse action taken/to be taken by the creditor could affect the financial position of its promoters and the company.
5) The company has other risk factors like a disruption in sources of funding, its inability to obtain or maintain statutory or regulatory approvals to do business, impact due to performance of Indian debt and equity markets, an increase in the levels of NPAs affecting business etc.,
6) Refer NCD prospectus for complete risk factors.
Also Read: Muthoot Finance Vs Kosamattam Finance Vs Muthoot Fincorp NCD – April-2023 issue – Which is better?
Should you invest in Sakthi Finance NCD of April 2023 issue?
Sakthi Finance NCD of upcoming issue offers high interest rates and yield. These days banks are offering high FD rates, however these NCDs still offer high interest rate up to 10.25% and yield up to 14.3%. Investors’ money would get doubled in 85 months. Company is also earning consistent margins and these are secured NCDs too.
On the other side, these NCD is rated as BBB (Stable) by ICRA, which are considered as low rating. The company indicated in their prospectus that some of their group companies have defaulted payments and interest to creditors. However, current prospectus does not talk about one of its group companies defaulting on the payments of FCNR bonds earlier (which is indicated in the last year NCD prospectus).
These NCD bonds are high risk. If investors are willing to consider all these risks, they can invest in these bonds, else they can avoid.
Source: Sakthi Finance Apr-23 NCD issue Prospectus from SEBI
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Nice guidance on Sakthi finance’s NCD… thanks Suresh ji.
Thank you Sanjeev