14.3% Sakthi Finance NCD – Feb-2024 – Details, Interest Rates and Review

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 February 8 and closes on February 21, 2024. 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 February, 2024? What are the risk factors one should consider before investing in Sakthi Finance NCD 2024?

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 – Feb-2024 – Issue Details

Subscription opening Date 08-Feb-24
Subscription closure Date 21-Feb-24
Issuing Security Name Sakthi Finance Limited
Security Type Secured Redeemable Non-Convertible Debentures
Issue Size (Base) Rs 100 Crores
Issue Size (Option to retain over subscription) Rs 100 Crores
Total issue size Rs 200 Crores
Issue price Rs 1,000 per bond
Face value Rs 1,000 per bond
Series I to VIII
Minimum Lot size 10 bonds and 1 bond there after
Tenure 24, 36, 60 and 85 Months
Interest Payment frequency Monthly and Cumulative
Listing on Within 6 working days on BSE/NSE
Lead Manager Bonanza Portfolio Limited
Debenture Trustee/s Catalyst Trusteeship Limited

Sakthi Finance NCD – Feb-2024 – Interest Rates

Series I II III IV V VI VII
Frequency of Interest Payment Monthly Cumulative Monthly Cumulative Monthly Cumulative Cumulative
Tenure (months) 24 24 36 36 60 60 85
Coupon (% per Annum) 9.00% NA 9.25% NA 10.25% NA NA
Effective Yield (% per Annum) 9.00% 9.74% 9.25% 10.52% 10.25% 13.17% 14.30%
Amount on Maturity (In Rs.) 1,000.00 1,194.83 1,000.00 1,315.66 1,000.00 1,658.72 2,013.13

Sakthi Finance NCD – Feb-2024 – Credit Ratings

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 Crores
  • FY2023– Rs 12 Crores

Why to invest in Sakthi Finance NCD – Feb-2024?

  • 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.
  • While Sakthi Finance profits are slightly fluctuating, it generates consistent margins. Investing in companies that are generating consistent margins reduces the default risks.
  • 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 Sakthi Finance NCD issue – Feb-2024?

  • 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.
  • Sakthi Finance operates in increasingly competitive financial services industry that creates significant pricing pressure and adversely affect its interest margins and income.
  • The company is involved in certain legal and other proceedings which, if determined against them, could have a material adverse impact on financials.
  • 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.
  • 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, performance of Indian debt and equity markets, an increase in the levels of NPAs affecting business etc.,
  • Refer NCD prospectus for complete risk factors.

Should you invest in Sakthi Finance NCD – Feb-2024?

  • 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% interest rates and yield up to 14.3%. Investors’ money would get doubled in 85 months. Company is also earning consistent margins and these secured NCDs too.
  • On the other side, these NCD is rated as BBB (Stable) by ICRA, which are considered as low rating.

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 Feb-2024 NCD issue Prospectus from SEBI

2 comments

  1. Suresh Sir,

    The calculation for the Effective Yield (% per Annum) for the last two Series is incorrect, kindly correct it.

    Thank you for the valuable article you are providing the many year, a loyal reader.

    Kind Regards
    Deepak

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