Introduction:
SREI Infrastructure Finance, 23year old listed NBFC, is entering the debt capital market with a public issue of secured redeemable non-convertible debentures (NCD) of face value Rs. 1,000 each to raise Rs. 75 crore with an option to retain another Rs 75 crore, taking the total fund raising to Rs. 150 crore.
Issue Details:
The first-cum-first serve issue opens on 20th September and closes on 25th October 2012, with an option in company’s hands to either close the issue earlier or extend the closing. Minimum application amount is Rs. 1 00,000 for series I and II while it is Rs 10,000 for series III and IV, and in multiples of Rs, 1,000 thereof across all series.
Rating: ‘AA’ by CARE and BRICKWORK indicating high degree of safety for timely servicing of financial obligations
Listing: To be listed on BSE with one NCD comprising a trading lot. NCD would be issued both in demat and physical (for individual investors) form.
What’s on offer: The 7 year NCD issue has 4 investment options as under:
|
Particulars |
Series I |
Series II |
Series III |
Series IV |
| Frequency On Interest Payment |
Monthly |
Quarterly |
Annual |
Cumulative |
| Investors who can Apply |
Individual/Huf |
Individual/Huf |
All |
All |
| Tenure |
7 Years |
7 Years |
7 Years |
7 Years |
|
Coupon Rate {% P.A} |
||||
| Individual Investor |
NA |
NA |
10.30% |
NA |
| Non-Individual Investor |
9.84% |
9.92% |
10.25% |
NA |
|
Effective Yield {% P.A} |
||||
| Individual Investor |
NA |
NA |
10.30% |
10.25% |
| Non-Individual Investor |
10.30% |
10.30% |
10.25% |
10.41% |
| Put Option |
After 5 Years |
After 5 Years |
After 5 Years Only For Individuals |
After 5 Years Only For Individuals |
| Redemption Amount {Per NCD} | ||||
| Individual Investor |
Face Value + Accrued Interest |
Face Value + Accrued Interest |
Face Value + Accrued Interest |
Rs. 2,000 {RS. 1,633} On Put |
| Non-Individual Investor |
Rs. 1,980 |
Company Background:
SREI Infrastructure Finance provides financial products and services to its about 30,000 customers engaged in infrastructure development and construction. For FY12, consolidated total income stood at Rs. 2,446 crore with PAT of Rs. 123 crore. For Q1FY13, consolidated total income was Rs. 756 crore and PAT Rs. 22 crore. As of 30th June 2012, company had networth of Rs. 3,200 crore, on equity of Rs. 503 crore, leading to BVPS of Rs. 64. Its asset quality indicates gross NPAs of Rs. 110 crore and net NPAs of Rs. 99 crore, translating to net NPAs ratio of 0.78%.
Rate of Return: Not very attractive vis-à-vis offer by other companies on their secured NCDs like Religare and Muthoot, which enjoy credit rating one notch above SREI Infra.
Recommendation:
The current NCD issue is not attractive as its effective yields are low, versus other existing options, currently underway. Only positive is that NCDs have a longer tenure of 7 years as against 5-6 years by other issuers. One can give this a miss!