Tuesday, September 6, 2016

SREI Infra NCD issue - Good buy for investors with moderate risk and lower tax bracket

#SREI Infra Finance issue of secured NCD of Rs. 250 Crore with an option of retaining upto Rs. 1000 Cr.  to be launched on Sep 7, closing on sep 29, 2016.  
About the company - #SREI Infrastructure Finance Ltd, is a RBI registered non-deposit taking NBFC. Classified as an “Infrastructure Finance Company” in the year 2011 by RBI. The company was originally incorporated in New Delhi on March 29, 1985 by the name Shri Radha Krishna Export Industries Limited with the Registrar of Companies, Delhi & Haryana, in accordance with the Companies Act 1956 as a Public Limited Company, to undertake lease and hire purchase financing, bill discounting and manufacture and export of certain goods. Company’s name was changed to Srei International Limited on May 29, 1992 and further changed to Srei International Finance Limited with effect from April 12, 1994. The name of the Company was further changed from Srei International Finance Limited to its existing name Srei Infrastructure Finance Limited on August 31, 2004. Company is registered as a Non-Banking Financial Company within the meaning of the Reserve Bank of India Act, 1934.

About the issue
From liquidity crunch to overflow, the market has seen a major shift of sentiment in past 6 months. The equity IPOs to Bond issues investors are lapping it up all.

After an overwhelming response of two tranches of DHFL Secured NCD issues, SREI is next on the block. SREI’s base issue at Rs. 250 crore, may retain up to 1000 crore with green-shoe option
Features in details –
Issue open and close - Opens on 7th September 2016, closes on 28th September 2016, however, the allotment is on first cum first served basis and the company may close issue on oversubscription within a day or two as well.
The NCD Bond – SREI is offering NCDs which are backed by security/assets. Hencce, the capital investment is secured by SREI, incase of non-payment/ non-liquidity invesors has the right on liquidating the secured asset to recover the cost.

Tenor – 400 days, 3 years and 5 years

Annual yield – Upto 10%, depending on tenor and interest payout option

Face value – Rs. 1000/ unit

Minimum and maximum investment -  The minimum application amount is Rs. 10,000 collectively across all options on NCDs and in multiples of One (1) NCD after the minimum application.

Categories of Invstors and allotment ratio - 
Category I – Rs. 200 crore
Category II – Rs. 200 crore
Category III – Individual & HUF Investors – Rs. 600 crore

NRIs, QFIs and foreign nationals cannot invest in this issue.
                                               
Credit Rating - SREI has received an AA+ from BWR, which s second highest rating after AAA, making it a safe investment option. This issue has received one notch better than last Secured NCD issue of last year which was at  AA.
Format  – Investors can hold both in physical or demat format, demat is not mandatory.
Listing – will be listed on both exchanges - BSE and NSE
Trading – Allowed from the first day, no lock-in period

Taxation – Though the dematerialised NCDs don’t attract TDS, the investment will taxed at short term (less than a year) and long term (debt investment more than a year are taxed at 10%) depending on the holding period. The interest will be taxed as per the tax bracket of the investor.


Series
I**
II#
III***
IV**
V#
VI
VII**
Frequency of Interest Payment
Cumulative
Monthly
Annual
Cumulative
Monthly
Annual
Cumulative
Minimum Application
Rs. 10000 (10 NCDs)
Face Value/ issue price
Rs. 1000/-
In multiples of
1000 (1NCD)
1000 (1NCD)
1000 (1NCD)
1000 (1NCD)
1000 (1NCD)
1000 (1NCD)
1000 (1NCD)
Tenor
400 days
3years
5 years
Coupon per annum
NA
9.35%
9.75%
NA
9.6%
10%
NA
Effective Yield (per annum) for Category I, Category II & Category III Investor(s)
9.08%
9.76%
9.82%
9.75%
10.02%
10.04
10.00%
Mode of Interest Payment
Multiple mode
Amount (` / NCD) on Maturity for Category I, Category II & Category III Investor(s) **
Rs. 1100
Rs. 1000
Rs. 1000
Rs. 1322
Rs. 1000
Rs. 1000
Rs. 1611

                                                             
Application Form for SREI Infra NCDs – Click here

Financial Health of the company - Annual Results Consolidated Figures in Rs. Crores / View Standalone

Mar-13
Mar-14
Mar-15
Mar-16
TTM
Sales
3,188.74
3,235.17
3,339.32
3,234.14
3543.88
Expenses
518.89
521.11
696.54
629.96
945.64
Operating Profit
2,669.85
2,714.06
2,642.78
2,604.18
2598.24
OPM
83.73
83.89
79.14
80.52
74.7
Other Income
25.8
25.19
21.24
27.8
49.29
Interest
2,139.25
2,350.28
2,274.15
2,310.75
2278.94
Depreciation
193.62
163.35
201.43
215.29
225.66
Profit before tax
362.78
225.62
188.44
105.94
142.93
Tax
102.71
88.11
67.04
44.41
51.31
Net Profit
263.18
138.51
129.11
72.52
100.77
EPS (unadj)
5.14
2.67
2.46
1.34

Dividend Payout
15.88
18.18
19.49
34.69


Compounded Sales Growth:
Compounded Profit Growth:
10 Years:
25.49%
10 Years:
-2.15%
5 Years:
14.66%
5 Years:
-17.86%
3 Years:
0.47%
3 Years:
-36.30%
TTM:
10.78%
TTM:
13.93%
*data – www.screener.in

After a difficult period of three years, company has seen a upward trend in last one year. The balance sheet and P&L sheet reflects the same.

Should you invest in #SREI secured Non-Convertible Bonds? 
It is a good debt investment  option with high yield and attractive tenor spread of 400 days, 3 years and 5 years. #NCDs are being offered by reputed infra-finance company, having a minimum investment requirement of Rs. 10, 000. The NCDs are secured, backed by assets, which means incase of default/ non-payment, assets can be liquidated to repay the debts.
The #coupon rate across segment is expected to be just above 1.5- 2 % from any bank FDs at this point of time. While a bank FD is offering 7.5% interest on yearly deposit, 400 days option is giving a good 1.5% extra return. Also, after a rough patch, the financial health of the company has improved thus interest payment ability. Brickworks has given it a thumbs up by giving it notch higher Rating of AA+ in the latest issue.

A person with moderate risk profile can invest a part of fixed income portfolio in this issue. Person in lower tax bracket will get to see higher return.


Risks in this issue – 

·         NBFC Business is particularly vulnerable to volatility in interest rates
·         SREI is in infrastructure sector, which has seen lull for over five years
·         Any increase in the levels of non-performing assets in loan portfolio, for any reason whatsoever, would adversely affect the business, results of operations and financial condition   
·         SREI derive majority/substantial of our revenues from our top 20 borrowers. Inability to maintain relationship with such borrower or any default and non-payment in future or credit losses of our single borrower or group exposure where they have a substantial exposure could materially and adversely affect business, future financial performance and results of operations

No comments:

Post a Comment