SREI Equipment Finance Ltd. NCDSREI Equipment Finance Ltd. is coming out with a 9.55% p.a.(upto) Pubic issue of Unsecured Subordinated Redeemable NCDs (Non Convertible debentures) of face Value of Rs.1,000/- each.  SREI Equipment Finance NCD is for an amount up to Rs. 500 crores (Base Issue) with an option to further retain over-subscription up to Rs. 500 crores thus aggregating to Rs. 1000 crores overall issue size. SREI Equipment Finance Ltd is a wholly owned subsidiary of SREI Infra Finance Ltd.

Both SREI Infra Finance Ltd (SIFL) and SREI Equipment Finance Ltd.(SEFL) have been frequently coming out with Public issue of NCDs to raise money in the past and SREI Infra Ltd had earlier come out with an NCD issue in Sept 2016 for 10% pa. NCDs as well issue in Jan/Feb 2017 with 9.5% NCD issue amounting to Rs. 760 crore. SREI Equipment Finance also came out with a 9.75% Pubic issue of secured redeemable NCD issue of issue size of 500 crore in January 2017. A  Quick review and Analysis of the SREI Equipment Finance Ltd. NCD has been attempted:

SREI Equipment Finance Ltd. NCD  Issue Details
Opening Date : 17th July 2017
Issue Closes on :  31st July, 2017.
Coupon (Interest Rate p.a.)  9.25% – 9.55%
Issue Size Base Issue Size is 500 crore
Green Shoe Option of further 500 crore
Face Value Rs. 1000/-
Durations:  5 years 3 months / 7 years / 10 years.
Frequency of Interest payment :  Options for Annual / Monthly. Cumulative payment
Minimum Application Lot  10 NCDs ( Rs. 10000)
Listing  BSE, NSE
Credit Ratings : ‘ BWR AA+ Outlook Stable’ by Brickwork Ratings
 AA+/Stable’ by SMERA.
Lead Managers Edelweiss Financial Services Limited, A. K. Capital Services Limited, SPA Capital Advisors Limited  ,Trust Investment Advisors Private Limited
Allotment First come first basis

About the Company

SREI infra  is one of the leading non-banking financing companies in the organized equipment financing sector in India with a principal focus on financing infrastructure equipment. It is registered  with the RBI as a non-deposit taking systemically important, non-banking financial company (“NBFC”).SREI Infra  operates in :

  1. Project Financing of Infrastructure
  2. Project Advisory & development
  3. Equipment Finance in Infra sector, Equipment Rental
  4. Power Sector
  5. Capital Markets, venture capital, Insurance & Broking services

SREI Equipment Finance Ltd. which started as a joint venture is as on date is a 100% subsidiary of SREI Infrastructure Finance Ltd. The company is primarily into the business of financing and refinancing of various kinds of engineering and construction equipment.

ISSUE STRUCTURE – BUCKET DETAILS

SREI Equipment Finance Ltd. NCDs are offering interest rates in the range of 9.25% to 9.55% per annum, which at the highest go upto 9.92%  . These NCDs  in monthly/ annual and cumulative options are available for a period of 5 years & 3 months, 7 years and 10 years.

SREI Equipment Finance Ltd. NCD : Rates for Individual Investors
Duration / Coupon Rate Monthly Option Annual Option Cumulative Option
5 Years 3 Months 9.25% 9.30% 9.30%
7 Yeards 9.35% 9.40% 9.40%
10 years 9.50% 9.55% 9.55%
 Click Here For Complete Details Of Various NCD Options

Performance of Earlier NCDs of SEFL and Some other Similar NCDs
  As on 14-07-2017
Company Srei Equipment (SEFL) 9.75%   Srei Infra (SIFL) 10% NCD Edelweiss Hsg Fin
NSE Code SREIBNPNCD-NL SREINFRA Y1 EHFLNCD N6
BSE Code 935940 935898 935788
BSE ID 975SEFL22B  10SIFL21 INE530L07228
Market Price 1022.9 1031.17 1056.5
Coupon Rate 9.75 10 10
Face Value 1000 1000 1000
Yield to Maturaity (YTM) 9.82% 9.84% 9.01%
ytm after brokerage 9.75% 9.77% 8.97%
Allotment Date 42752 42649 42570
Redemption   Date 44578 44475 46222
Last interest  date 42826 42826 42935
Next Interest Date 43191 43191 43300
ISIN INE881J07EN8  INE872A07UB7 INE530L07228
Interest Frequency Annual Annual Annual
Type Secured Secured Secured
Rating AA+ (BWR) AA+ (BWR) ICRA AA. BWR AA+
SEFL : Financials in Brief  (Rs. In Millions)
Parameter/ Year 2017 2016 2015 2014
Revenues 24933.3 26,138.80 26,014.40 26,179.30
PROFIT BEFORE BAD DEBTS, PROVISIONS AND TAX 4,691.50 5,566.10 5,639.30 6,169.60
Bad debts written off (Net)/Provision for Non Performing Assets 2441.8 3893.3 3362.2 2597.5
PROFIT BEFORE TAX 2,164.20 1,604.30 2,273.60 3,575.50
PROFIT AFTER TAX 1,488.40 1,152.60 1,530.20 2,253.80
Net Profit Margin 5.97% 4.41% 5.88% 8.61%
Net Worth 25,204.00 23,639.80 22,487.20 20,965.60
Net NPA 1.76 1.99 3.83 4.07

Assessment

      • SREI Equipment Finance Ltd. is in Infrastructure finance space which has in the past seen quite difficult period and is still not fully out of woods.
      • SREI Equipment Finance Ltd. was faced with mounting NPA about 4-5 years back and though it has been been recovering well as evident for lowering of NPA, element of risk still remains due to inherent nature of infrastructure financing. 
      • The present issue of Bonds are rated AA+ by Brickwork Ratings, which ensure a good degree of safety. 
      • NCDs are taxable, thus the effective  return gets reduced for those in tax bracket. For investors falling in high tax bracket of 30%, investing in NCDs is not very attractive.
      • With upfront brokerage from brokers in range 1%, debt issues issue the effective return form the issue can be slightly high.
      • The NCD offered in this issue are unsecured in nature whereas earlier NCDs were secured. These earlier NCDs as shown in table above are trading at YTM of 9.8 against present offered interest rate of 9.55%.
      • SREI Equipment Finance Ltd. NCDs are suitable for investors who are willing to take risk for a slightly higher return. Though no case of default in my knowledge since inception of SREI and frequent NCDs issued by it, its business makes it more prone to such eventualities. Other investors can preferably take only small exposure. 
      • Due to low liquidity in SREI  infra and SREI Equipment Finance Ltd. NCds in the past coupled with risks associated with infra space, I do not intend to subscribe to this NCD Issue. However in general though not ivested in this issue,  my assessment is that the SREI group will do well due to good prospects for infra in the country and I continue to remain invested in its equity shares.
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Related Posts: NCDs: Tax Benefits and Issues

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.

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