Sakthi Finance Aug. 25 NCD issue review - (Not Rated)

•    This is the 10th debt offer from the company since March 2015. 
•    The last debt issue was in the month of March 2025.
•    This debt offer carry ICRA/BBB stable rating, which is a bit risky.
•    The company has posted average financial performance for the reported periods.
•    There is no harm in skipping this a bit risky debt issue.

ABOUT COMPANY:
Sakthi Finance Ltd. (SFL) is an Investment and Credit company with primary focus on financing pre-owned commercial vehicles. It also provides finance for purchasing infrastructure construction equipment, multi-utility vehicles, cars, jeeps and other machinery. The finances provided are secured by lien on the assets financed. SFL’s target customers predominantly comprise Small / Medium Road Transport Operators (“SRTOs / MRTOs”) and primarily hail from rural / semi-urban area. The SRTOs / MRTOs looks for speedy disposal of finance at competitive rates. 

It has identified this opportunity and positioned itself between the organized banking sector and local money lenders by offering the finance at competitive rate with flexible and speedy lending services to customers. The company operates primarily in the Southern region of the country mainly in the States of Tamil Nadu and Kerala through its branch network and customer service points. It has network of 54 branches, located in Tamil Nadu, Kerala, Andhra Pradesh, Karnataka, Maharashtra, Haryana and Union Territory of Puducherry. In addition to finance business, it generates power from windmills and sell it to Tamil Nadu Electricity Board and Gujarat Urja Vikas Nigam Limited. At present, it has 17 windmills with an aggregate capacity of 5,150 kW located in the States of Tamil Nadu and Gujarat. As of December 31, 2024, it had 681 employees on its payroll.

ISSUE DETAILS:
The company is coming out with its10th debt offer of 1500000 secured, redeemable, non-convertible debentures of face value of Rs. 1000 each to mobilize Rs. 150 cr. The issue consists of base size of Rs. 75 cr. and has green shoe option to retain oversubscription of Rs. 75 cr. The issue opens for subscription on August 08, 2025, and will close on or before August 22, 2025. The minimum application to be made is for 10 NCDs (i.e., Rs. 10000) and in multiple of 1 NCD (i.e., Rs. 1000), thereon, thereafter. Post allotment, NCDs will be listed on BSE. The company is spending Rs. 4.00 cr. for this debt offer and from the net proceeds, it will utilize at least 75% for onward lending, financing and for repayment/prepayment of existing borrowings with interest, and maximum up to 25% for general corporate purposes.

This debt offer is solely lead managed by Bonanza Portfolio Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. Catalyst Trusteeship Ltd. is the debenture Trustee. 

The company is offering coupon rates ranging from 9.00% to 10.25% with a monthly/ cumulative interest payment option. This debt issue has tenor of 24 months, 36 months, 60 months and 85 months. The company has allocated 5% for Institutional Investors, 15% for Non-Institutional Investors, 40% for HNIs and 40% for Retail investors. 

CREDIT RATINGS:
This debt offer is rated ICRA/BBB Stable by ICRA Ltd. The rating of the NCDs by ICRA indicates moderate degree of safety regarding timely servicing of financial obligations and carry moderate credit risk. The Credit rating given by ICRA Limited is valid as on the date of this prospectus and shall remain valid until the rating is revised or withdrawn. The rating provided by ICRA may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating. This rating is not a recommendation to buy, sell or hold the NCDs and investors should take their own decisions.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 171.34 cr. / Rs. 9.26 cr. (FY21), Rs. 181.35 cr.  / Rs. 9.52 cr. (FY22), and Rs. 191.94 cr. / Rs. 12.49 cr. (FY23), Rs. 206.74 cr. / Rs. 15.71 cr. (FY24), Rs. 214.99 cr. / Rs. 16.65 cr. (FY25). Thus, the company posted growth in its top and bottom lines for the reported periods.

Its Net NPAs were 2.39%, 2.62%, 2.95%, and 2.14%, as of March 31, 2025, March 31, 2024, March 31, 2023, and March 31, 2022, respectively. Its debt equity ratio of 5.53 as of March 31, 2025, will stand enhanced to 6.27 post this debt issue. As of the said date, its paid-up equity capital of Rs. 64.71 cr. was supported by free reserves of Rs. 164.79 cr.