SREI Infrastructure Finance – NCD Details & Review – Sep 2012
SREI Infrastructure Finance is the latest company to raise funds through NCDs. Secured NCD from SREI Infrastructure is offering interest upto 10.30%. The first-cum-first serve issue opens on 20th Sep. It is offering lower rates as compared to recent NCDs of Religare Finvest (12.5%), Muthoot Finance (12%) & Shriram City Union (11.75%)
About the Company : Srei Infrastructure Finance Limited (NBFC) provides financial products and services to its customers engaged in infrastructure development and construction, with particular focus on power, road, telecom, port, oil and gas and SEZ sectors in India. With a large customer base and over Rs. 307,643.50 million of consolidated assets under management, Srei Group has a pan-India presence with a network of 198 offices.
SREI Infrastructure Finance has been classified as an infrastructure finance company (NBFC-ND-SI) with effect from March 31, 2011. The company provides financial products and services for customers engaged in infrastructure development and construction, focusing majorly on power, road, telecom and various other sectors in India.
Financials : On a consolidated basis, the company’s total income increased by 49 per cent to Rs 2,446 crore during FY12 while its net profit after tax stood at Rs 123 crore as against Rs 196 crore in the same period last year. This was on account of some forex losses.
The disbursement by the group increased by 49 per cent to Rs 18,600 crore in FY12. However, despite the same we believe there could be some pressure on the quality of its financing as it provides services to sectors that are prone to high risks. Further, for FY12, the net NPAs of the company increased by 20 basis points to 2 per cent and the net interest margin (NIM) contracted by 20 basis points to 4.4 per cent on a YoY basis, which does not bode well for the company.
Issue Details : The issue opens on 20th Sep 2012, and closes on 25th Oct 2012 . Allotment will be done on First-come-first serve basis.
The minimum application for the issue is of Rs 1 lakh (100 NCDs with face value of Rs 1,000). Thereafter the application can be made in multiples of Rs 1,000 or one NCD. The NCD is proposed to be listed only on the Bombay Stock Exchange (BSE).
Size of Issue : It is public issue of secured, redeemable, non-convertible debentures (NCDs) of face value of Rs 1,000 each aggregating upto Rs 75 crore with an option to retain oversubscription upto Rs 75 crore, aggregating to a total of upto Rs 150 crore.
Rating : The NCDs proposed to be issued under this Issue have been rated ‘CARE AA (Double A)’ by CARE and ‘BWR AA (Double A)’ by Brickwork, which indicates high degree of safety regarding timely servicing of financial obligation. Such instruments carry very low credit risk
Listing : To be listed on BSE with 1 NCD as trading lot.
Put Option : Exercisable only by Individual Category investors at the end of 5 years from the Deemed Date of Allotment
Summary
Offered Rate of interest(10.3%) is not attractive vis-a-vis offer by other companies on their secured NCDs – Religare Finvest (12.5%), Muthoot Finance (12%) & Shriram City Union (11.75%) which have credit rating one point above Srei.
Also, many banks are offering 9-10% interest on their fixed deposit for this duration. so taking risk for extra 0.5% is not advisable.
As the offered interest rates are lower, you can avoid this NCD.
If you have any queries regarding the safety, liquidity, returns etc of NCD, please leave a comment below .