SREI Infrrastructure Finance has opened its public issue of NCDs on 26 Aug 2013 and it closes on 17-Sep-2013
Type of Instruments – Secured Redeemable NCDs
Size of Issue – Rs 200 crores
Listing – Proposed to be listed on BSE
Credit Rating – AA-/negative by CARE and AA by BRICKWORK
Investment option – Monthly / Annually / Cumulative Interest for 3 yrs, 5 yrs & 6 years
About Company
SREI is a Public Financial Institution (PFI). The company provides financial services to its customers engaged in infrastructure development and construction, with particular focus on power, road, telecom, port, oil and gas and special economic zone (SEZ) sectors in India with a medium to long term perspective.
Total income on a standalone basis for the period ended March 31, 2013 and March 31, 2012 stood at Rs. 1,666 crore and Rs. 1,181 crore respectively. Net profit for the same periods was registered at Rs. 94.96 crore and Rs. 57.96 crore respectively.
Gross NPAs of the company as on March 31, 2013 stood at 2.77% as against 1.58% as on March 31, 2012, while Net NPAs were at 2.30% as against 1.18%.
Positive Points
- High Coupon rate of 11.75% as compared to Bank FD rates of 9%
- If you fall in the lower tax bracket, post-tax returns for some options in this NCD are superior to that of tax-free bonds.
Negative factors
- Lower returns than Muthoot Finance NCDs
- For an investor in the highest tax bracket, it doesn’t make sense to invest in these as the net returns are comparable with that of the tax-free bonds.
- NCDs are illiquid. If the interest rates fall, it may be difficult for investors to capitalise on falling interest rates. If you invest in govt bonds / short medium term debt funds, and if the interest fall in 2-3 years time frame, they may give you better returns than these NCD offering 12.5%.
Taxation Aspects
- NCDs taken in the demat form will NOT attract any TDS on the interest income. However, if NCD are taken in physical form, TDS will be applicable if the interest amount exceeds Rs. 5,000
| Interest earned on NCD | Taxable as per tax slab of Investor |
| If sold on exchange (before 12 months) | Short term capital gain / loss – Taxable as per tax slab of Investor |
| If sold on exchange (after 12 months) | Long term capital gain / loss – Taxable @ 10.30% without indexation |
How to Apply
- Physical Form – You can download the Form and submit to designated bank branches alongwith cheque. SREI NCD Application Form Download
- Online – You can invest online in DMAT form through your online share trading account or through your broker.
Summary
- Investors in lower tax slab can consider investing in these NCD, but not more than 10% of their debt allocation.
- Lower interest than Muthoot Finance NCD, however safer than Muthoot Finance also.
- Investors in the 30% tax bracket should invest in tax-free bonds or go for debt funds or FMPs