SREI Infra

By Research Desk
about 6 years ago
SREI Infra

By Geetanjali Kedia

 

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, third time this fiscal (previously in April and August 2013) to raise Rs. 100 crore now.

 

Issue Details:

Opened on 30th December 2013 and will close on 31st January 2014, 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 and August. ‘AA-’ by CARE and ‘AA’ by BRICKWORK indicating high degree of safety for timely servicing of financial obligations.

 

Listing: On BSE and NSE with one NCD comprising a trading lot. NCD would be issue on both demat and physical form to retail investors. To institutional and non-institutional investors, allotment is only in the demat form and trading on the exchanges is also compulsorily in demat form.

 

What’s on offer: The NCD issue has 7 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

Series VI

Series VII

Tenure

2 years

2 years

3 years

3 years

5 years

5 years

5 years

Investors who can apply

All

Retail and non-institution

All

Retail and non-institution

All

Retail and non-institution

Retail and non-institution

Type of Security

Demat or physical

Demat or physical

Demat or physical

Demat or physical

Demat or physical

Demat or physical

Only demat

Frequency of interest payment

Annual

Cumulative

Annual

Cumulative

Annual

Monthly

Annual

Coupon Rate (% pa)

 

 

 

 

 

 

 

  • Retail (Individual / HUF)

11.25%

NA

11.50%

NA

11.75%

11.16%

Refer Note 1

  • Non-Institutional Investor

11.00%

NA

11.25%

NA

11.50%

10.94%

Refer Note 2

  • Institutional Investor

11.00%

NA

11.25%

NA

11.50%

NA

NA

Effective Yield (% pa)

 

 

 

 

 

 

 

  • Retail (Individual / HUF)

11.25%

11.27%

11.50%

11.51%

11.75%

11.75%

11.77%

  • Non-Institutional Investor

11.00%

11.00%

11.25%

11.24%

11.50%

11.51%

11.53%

  • Institutional Investor

11.00%

NA

11.25%

NA

11.50%

NA

NA

Redemption Amount (per NCD)

 

 

 

 

 

 

 

  • Retail (Individual / HUF)

Rs. 1,000

Rs. 1,238

Rs. 1,000

Rs. 1,387

Rs. 1,000

Rs. 1,000

Rs. 1,000

  • Non-Institutional Investor

Rs. 1,000

Rs. 1,232

Rs. 1,000

Rs. 1,377

Rs. 1,000

Rs. 1,000

Rs. 1,000

  • Institutional Investor

Rs. 1,000

NA

Rs. 1,000

NA

Rs. 1,000

Rs. 1,000

Rs. 1,000

Note 1: Year 1 - 12.50%, Year 2 - 12.00%, Year 3 - 11.50%, Year 4 - 11.25%, Year 5 - 11.25%

Note 2: Year 1 - 12.00%, Year 2 - 11.50%, Year 3 - 11.50%, Year 4 - 11.25%, Year 5 - 11.25%

 

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 H1FY14, company’s consolidated total income was Rs. 1,591 crore and PAT Rs. 88 crore with AUMs of Rs. 34,754 crore.  

 

Rate of Return:

The highest yield is being offered for 5 years tenure, with yields ranging between 11.75%-11.77% pa for retail investors. 11.77% pa translates into post-tax returns of 8.13%, assuming 30.90 tax rate. This is lower than yields of 12.13% and 12% being offered by Manappuram and Muthoot Finanace for 5 years secured NCDs. Moreover, SREI Infra is not the best placed in the industry coupled with an average rating for the instruments on offer. Thus, even the innovative structure of declining coupon rates every year under Series VII does not look compelling.

 

Thus, preference remains for 20 years tax free bonds with interest of 9.01% for National Housing Bank (NHB) with AAA rating.

 

Recommendation:

The issue is not recommended as the coupon rate is not attractive vis-à-vis other NCD issues also, let alone the tax free PSU bonds.

 

 

 

 

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