SREI Infrastructure Finance Ltd.
is again coming out with a 9.5% Pubic issue of secured redeemable Non-Convertible Debentures (NCD) with total issue size of approx. 706 crore. SREI Infrastructure Finance NCD is offering extra .25% benefit for existing share holders /debenture holders/ Senior Citizens . Earlier SREI Infrastructure Finance Ltd. had come out with a 10% Public NCD Issue in 2016 for aggregate amount of Rs. 1000 crore and its 100% subsidiary SREI Equipment Finance Ltd. came out with a 9.75% Pubic issue of secured redeemable NCD issue of issue size of 500 crore in January 2017. 

SREI NCD  Issue closed on 16/02/17. While the base issue of Rs. 200 crore was subscribed, the extended issue size of Rs. 706 crore  was not fully subscribed. The final subscription figures are as follows:

Final Subscription:SREI Infrastructure Finance Ltd.  Tranche II NCD 03/02/17-16/02/17
 Category 1 (30% share)Category II (20% share)Category III (50% share)Overall
 On Base Issue of 200 cr3.270.81.751.71
On Total Issue  of 706.4 cr0.930.230.50.48




Subscription: SREI Infrastructure Finance Ltd.  NCD 03/02/17
 Category 1 (30% share)Category II (20% share)Category III (50% share)Overall
 On Base Issue of 200 cr2.570.681.21.23
On Total Issue  of 706.4 cr0.730.190.340.35
Subscription: SREI Infrastructure Finance Ltd. NCD Day3
 Category 1 (30% share)Category II (20% share)Category III (50% share)Overall
 On Base Issue of 200 cr2.570.71.11.17
On Total Issue  of 706.4 cr0.730.20.310.33
Subscription: SREI Infrastructure Finance Ltd NCD Day 2
 Category 1 (30% share)Category II (20% share)Category III (50% share)Overall
 On Base Issue of 200 cr0.070.650.960.81
On Total Issue  of 706.4 cr0.020.180.270.23

Subscription: SREI Infrastructure Finance  Ltd NCD Day 1
 Category 1 (30% share)Category II (20% share)Category III (50% share)Overall
 On Base Issue of 200 cr0.070.590.660.59
On Total Issue  of 706.4 cr0.020.170.190.17

SREI Infrastructure Finance NCD: Issue Details

IssuerSrei Infrastructure Finance Limited
InstrumentSecured Redeemable Non-Convertible Debentures
Issue ScheduleThe Tranche- II Issue shall be open from Monday, 30th January 2017 to Thursday, 23rd February 2017
Issue SizeBase Issue Rs.200 Crores with an option to retain oversubscription up to Rs.506.64 Crores . Total aggregating to Rs.706.64 Crores.
Face ValueRs.1,000/-
Application SizeRs.10,000/-  ( 10 NCDs) across all Series and in multilpes of Rs.1,000/- (1NCD) there of.
Credit Rating“AA+”  by Brickworks (Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations).
SREI Infrastructure Finance NCD: ISSUE STRUCTURE – BUCKET DETAILS
CategoryI – InstitutionalII – Non InstitutionalIII – Individual
Category Allocation10% of overall Issue Size.20% of overall Issue Size.70% of overall Issue Size.
Bucket Size (Rs.) For issue size of  Rs.706.64 CrsRs.70.66 CroresRs.141.33 CroresRs.494.65 Crores

ISSUE STRUCTURE

Option/SeriesI^II#III~IVV^VI~VIIVIII^
Nature of NCDsSecured
Who can ApplyAll categories of investors (Category I, II and III)
Frequency of InterestCumulativeAnnualMonthlyAnnualCumulativeMonthlyAnnualCumulative
Tenor400 Days400 Days3 Years3 Years3 Years5 Years5 Years5 Years
Coupon Rate (% p.a.) for :
Category I, II & IIIN.A8.50%8.88%9.25%N.A.9.12%9.50%N.A.
Effective Yield (% p.a.) for :
Category I, II & III8.54%8.52%9.25%9.27%9.25%9.50%9.51%9.50%
Amount ( Rs. per NCD) on Maturity for ^ :
Category I, II & IIIRs.1,094/-Rs.1,000/-Rs.1,000/-Rs.1,000/-Rs.1,304/-Rs.1,000/-Rs.1,000/-Rs.1,575/-
~Series III & Series VI NCDs would be allotted compulsorily in dematerialized form to all categories of Investors.
^ Subject to applicable tax deducted at source, if any.
 
Note: Investors in the proposed NCD who fall under Category III (i.e. “Individual”) and who are holder of NCD(s)/Bond(s) previously issued by the company and Srei Equipment Finance Limited (“SEFL”), in past public issues of Secured NCD\ of the company and/or SEFL and/ or are equity shareholder(s) of the company and/or are Senior Citizens and/or are Employees of Srei Group, on Deemed Date of Allotment and who have subscribed for Series III NCDs and/or Series IV NCDs and/or Series V NCDs and/or Series VI NCDs and/or Series VII NCDs and/or Series VIII NCDs shall be eligible for Additional coupon of 0.25% p.a. provided the proposed NCDs are held by the Investors on the relevant Record Date applicable for payment of respective coupon in respect of Series III, Series IV, Series VI and Series VII and are NCD Holders on the Record Date for redemption of NCD in case of Series V and Series VIII.
For Investors who fall under Category III and who are holder of NCD(s)/Bond(s) previously issued by the company and/or SEFL in past public issues of Secured NCDs of the company and/or SEFL and/or are Senior Citizens and/or are Employees of Srei Group on Deemed Date of Allotment applying in Series V and Series VIII NCDs, the maturity amount at redemption along with the additional yield would be Rs.1,315/- per NCD and Rs.1,594/- per NCD respectively.
Category III Investors subscribing to Series I NCDs and Series II NCDs (i.e.400 days Annual and Cumulative option) shall not be eligible for any additional incentive, regardless of their qualifications as mentioned hereinabove.
About the Company

SREI is a finance company with lending operations in infrastructure. It also operates in :

  • Project Financing of Infrastructure
  • Project Advisory & development
  • Equipment Finance in Infra sector, Equipment Rental
  • Power Sector
  • Capital Markets, venture capital, Insurance & Broking services

Other notable points about the company are :

  • The company has history of over 25 years in the infrastructure sector.
  • With 99 offices pan India we boast of a large customer base and over 367,028 million of Consolidated Assets Under Management as on March 2016 stood at 36,000 crore .
  • SREI is classified as “Infrastructure Finance Company Status (IFC)” by the Reserve Bank of India (RBI) within the overall classification of Non-Banking Finance Company.
  • Srei has also been notified as a “Public Financial Institution” by the MCA, under section 4A of Companies Act, 1956 (now Section 2(72) of the Companies Act, 2013).
  • SREI is engaged for last 25 years in providing services in the infrastructure sector: infrastructure project finance, advisory and development, infrastructure equipment finance, venture capital, capital market, Equipment rental, integrated rural network of Common Services Centres (CSCs), insurance broking, SEZ and industrial park and Environment.
  • Srei Infra’s power arm, India Power has formed 50:50 joint venture with a German power company, Uniper. The entity is to focus on a broad range of services in the power sector.
  • In last 2-3 years as As infrastructure spending slowed, disbursements and profits of SREI were also affected.  In FY15 SREI’s Gross NPA ratio deteriorated to 6.62% from 3.53% in March 2014. Also the net NPAs went up to 5.51% from 3.09% in March 2014.The Company posted muted financial results for year 2015-16 and had been grappling to contain NPA. The NPA have come down to around 4%.

SREI Infrastucture Finance NCD Offer Objective: The object of the proposed issue is to raise funds for various leading/financing activities to repay the company’s existing loans and business operations. Category 1: Institutional Category, Category II: Non-Institutions, category III- Individuals

Financials of SREI Infrastructure Finance Ltd.

Annual Results  Rs. Crores
 Mar-13Mar-14Mar-15Mar-16
Sales3,188.743,235.173,339.323,234.14
Operating Profit2,669.852,714.062,642.782,604.18
OPM83.7383.8979.1480.52
Interest2,139.252,350.282,274.152,310.75
Depreciation193.62163.35201.43215.29
Profit before tax362.78225.62188.44105.94
Net Profit263.18138.51129.1172.52
EPS (unadj)5.142.672.461.34

SREI results for last three years have been subdued. However quarterly results show some improvement.

Quarterly ResultsRs. Crore
ParticularsSep-16Jun-16Mar-16Dec-15Sep-15
Sales1093.68967.98790.9773.55834.15
PBIDT869.48669.6647.11657.03673.79
Interest681.79533.96579.19572.43593.36
PBDT187.69135.6467.9284.680.43
Depreciation96.6364.0842.9757.0161.6
Profit After Tax61.6650.8616.915.368.5
EPS (Unit Curr.)1.231.030.410.340.23
Equity503.24503.24503.24503.24503.24


Assessment

  • SREI is a finance company with lending operations in infrastructure. It also operates in project advisory and equipment finance. As infrastructure spending slowed, disbursements for SREI were also affected. Quarterly results indicate some uptick. There is also some marginal  improvement on NPA front which had deteriorated considerably. SREI Infra net NPAs went up to 5.51% from 3.09% in March 2014. The Net NPA have come down to around 4% by 2016 end and have shown a  further  downtrend there after. Management has recently indicated its guidance of bringing Net NPA to around 1% in one year time. 
  • The present issue of SREI Infrastructure Finance NCD are rated AA+ by Brickwork Ratings, which ensure a good degree of safety. The NCD issue in Sept 2016 also carried the same rating.
  • Its earlier issue of NCDs in 2015 was rated CARE AA- by CARE and BWR AA by Brickwork Ratings. In sept 2015, CARE had further downgraded its Ratings from “AA-“ to “A+” and unsecured bonds from “AA-“ to “A”.  Some progress on the NPA and financial front and pickup in infra sector has again given it some life and led to present rating by Brickwork. Thus the company is prone to credit downgrades.
  • Further CARE has now assigned a rating of ‘CARE A+ (Single A Plus)’ to some of SREI Infra outstanding NCDs vide their letters dated March 21, 2016 and re-validation letter dated December 05, 2016. These NCDs were earlier rated ‘CARE AA- . However Brickwork Ratings  upgraded Srei Infrastructure Finance rating to BWR AA+ with stable outlook from BWR AA for its non-convertible debentures (NCDs) aggregating to Rs 4,500 crore in July 2006. 
  • Fidelity Investment Trust Fidelity Series Emerging   Markets Fund  and  BNP Paribas  Lease Group  hold 8.03% and 5% stake in SREI Infra Equity. 
  • In the scenario of falling interest rates, SREI Infra NCD is providing attractive interest rate of 9.50%  per annum . Further shareholders / debenture holders are getting .25% extra.
  • Liquidity is a big issue with almost all SREI debentures which have been marked with thin trading volumes.
  •  NCDs are taxable, thus the return get reduced by individual’s Tax bracket.
  • With upfront brokerage from brokers in range 1%, debt issues had  also been attracting people looking for short term returns. However in past Listing of several NCDs like  SREI Infra Tranche 1, SREI Equipment Finance, Reliance Home Finance etc. has been below the face value and investors desirous of investment can buy at a better price from the secondary market. Hence even though interest rates offered are better tahn some recent issues, SREI Infrastructure Finance NCD is not a very attractive proposition for investors. 
  • Following post may be helpful to get a complete picture of NCDs listed in stock Exchanges Click Here