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SREI Equipment NCD offer review

Posted on Thursday, December 29, 2016

SREI Equipment NCD offer review

SREI Equipment Finance Ltd (SEFL) 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. SEFL is registered with the RBI as a non-deposit taking systemically important, non-banking financial company (“NBFC”). The company provides financial products and services to companies operating in the construction, mining, technology and solutions, healthcare, ports and railways, oil and gas, agriculture and transportation sectors. Its financial products and services comprise loans, leases, rentals and fee-based services.

To meet its lending requirements and repayment of loans, the company is coming out with Secured Redeemable Non-convertible debentures of Rs. 1000 each to mobilize Rs. 500 crore. The base size of the issue is Rs. 250 crore and has green shoe option for retaining 100 per cent oversubscription. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiple of 1 NCD (Rs. 1000) thereon, thereafter. Issue opens for subscription on 03.01.17 and will close on or before 20.01.17. Post allotment, NCDs will be listed on BSE and NSE. Although allotment is available in demat as well as physical mode, trading will take place only in demat mode. This is second debt issue from this company since April 2015.

These debt instruments has maturity periods of 400 days, 3 years and 5 years and interest payment options are cumulative, monthly or yearly as per the choice of investors. The coupon rates are ranging from 8.90 per cent to 9.75 per cent. For cumulative scheme, for 400 days under cumulative scheme it offers premium of Rs. 95-97, for 3 years Rs. 305-315 and for 5 years Rs. 575-593 per NCD on maturity depending on category of investors. Post issue its current debt-equity ratio will stand enhanced from 4.83 to 5.03. While it’s top line remains more or less stagnant, its bottom line has shown declining trends from FY 13 onwards that raises concern.

Issue is lead managed by Edelweiss Financial Services Ltd, A K Capital Services Ltd, Karvy Investor Services Ltd, SREI Capital Markets Ltd, Trust Investment Advisors Pvt Ltd. Axis Trustee Services Ltd is the debenture trustee and Karvy Computershare Pvt Ltd is the registrar to the issue. This offer has credit rating of BWR AA+ by Brickworks and SMERA AA/Stable by Smera ratings. These ratings are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.

Conclusion: Considering the prospects for equipment finance sector and the AA grade with lucrative coupon rates makes this offer attractive for those who are looking for steady interest income.

Author of the post: Dilip Davda

Dilip Davda

Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Corporate India, Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.
Email: dilip_davda@rediffmail.com

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. As SME issues have entry barriers and low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

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