SREI Infra
Introduction:
Kolkata head-quartered SREI Infrastructure Finance has entered the debt capital market with a public issue of secured redeemable non-convertible debentures (NCD) of face value Rs. 1,000 each to raise Rs. 100 crore with an option to retain another Rs. 100 crore, taking the total fund raising to Rs. 200 crore.
Issue Details:
The issue opened on 26th August 2013 and will close on 17th September, with an option in company’s hands to either close the issue earlier or extend the closing. Minimum application amount is Rs. 10,000, and in multiples of Rs, 1,000 thereafter.
Rating: Unchanged from its previous issue in April/May this year - ‘AA-’ by CARE and ‘AA’ by BRICKWORK indicating high degree of safety for timely servicing of financial obligations.
Listing: To be listed on BSE with one NCD comprising a trading lot. NCD would be issued both in demat and physical (for individual investors) form.
What’s on offer: The NCD issue has 5 investment options for individuals/HUF and 3 for institutional and other investors, as under:
| Particulars | Series I | Series II | Series III | Series IV | Series V |
| Frequency of interest payment | Annual | Cumulative | Monthly | Annual | Cumulative |
| Investors who can apply | All | Only Individual/HUF | All | All | Only Individual/HUF |
| Tenure | 3 years | 3 years | 5 years | 5 years | 6 years 3 months |
| Type of Security | Demat or physical | Demat or physical | Only Demat | Demat or physical | Demat or physical |
| Coupon Rate (% pa) |
|
|
|
|
|
| 11.50% | NA | 11.16% | 11.75% | NA |
| 10.75% | NA | 10.35% | 10.85% | NA |
| 10.90% | NA | 10.50% | 11.00% | NA |
| Effective Yield (% pa) |
|
|
|
|
|
| 11.50% | 11.51% | 11.75% | 11.75% | 11.72% |
| 10.75% | NA | 10.85% | 10.85% | NA |
| 10.90% | NA | 11.01% | 11.00% | NA |
| Redemption Amount (per NCD) |
|
|
|
|
|
| Rs. 1,000 | Rs. 1,387 | Rs. 1,000 | Rs. 1,000 | Rs. 2,000 |
| Rs. 1,000 | NA | Rs. 1,000 | Rs. 1,000 | NA |
Company Background:
SREI Infrastructure Finance provides financial products and services for infrastructure development and construction. For FY13, consolidated total income stood at Rs. 3,110 crore with PAT of Rs. 263 crore and AUMs of Rs. 33,330 crore, as of 31st March 2013. However, its asset quality deteriorated sharply, with gross NPAs surging to 2.77% from 1.58% of 31st March 2012, and net NPAs nearly doubling to 2.30%, from 1.18% a year ago. Thus, there is considerable stress on the company’s books. For Q1FY14, company’s consolidated total income was Rs. 783 crore and PAT Rs. 47 crore.
Recommendation:
The current NCD issue carries attractive returns across maturities, with yields of 11.50%-11.75% for 5 years being the highest for individuals. However, the company is not the best placed in the sector witnessing tremendous stress and uncertainty. Comparison with company’s previous issue made earlier this year cannot be made as the liquidity is very meager on BSE, with barely a couple of trades occurring in a day and yields nearing 17% for the 5 year instrument.
Hence, only those with a high risk appetite must go for the 5 year NCDs - Series III or IV, preferably the latter which carries lower re-investment risk.