SREI Equipment Finance -December 2018 NCD offer review (May apply)

SREI Equipment Finance Ltd Logo

•    SEFL is SREI group financing arm for CME sectors.
•    This is the 5th debt offer from the company since April 2015.
•    Offer is rated AA/Stable by BWR and ACUITE.
•    Investors may consider investment in secured NCDs.

SREI Equipment Finance Ltd. (SEFL) is the leading financier in the Construction, Mining and allied Equipment ('CME') sector in India, with an approximately 33.00% market share in Fiscal 2018 (Source: Feedback Reports). This sector primarily consists of equipment used for earthmoving and mining, concreting, road building, material handling, material processing and allied activities. Its product offerings include loans, for new and used equipment, and leases.

For the purpose of onward lending and repayment of interest and principal of existing loans (75% of fund mobilized) as well as general corpus fund need (25% of fund mobilized), SEFL is coming out with debt offer of Secured as well as Unsecured Subordinated Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 150 crore with a green shoe option to retain oversubscription to the tune of Rs. 150 crore making the total issue size of Rs. 300 crore.  Issue opens for subscription on 19.12.18 and will close on or before 18.01.19. Minimum application is to be made 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. This is the 5th debt offer from the company since April 2015.

This issue is rated as BWR AA/Stable by Brickwork Ratings and ACUITE AA/Stable by ACUITE Ratings. This rating indicates that instruments with such ratings are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.  Issue is jointly lead managed by Edelweiss Financial Services Ltd. IIFL Holdings Ltd., Trust Investment Advisors Pvt. Ltd. and Tipsons Consultancy Services Pvt. Ltd. while Karvy Computershare Pvt. Ltd. is the registrar to the issue. Axis Trustee Services Ltd. is the debenture trustee.

These NCDs have tenures of 400 days, 3 yrs, 5 yrs and 10 yrs (for Unsecured).  It offers coupon rates ranging from 9.75% to 10.75% based on selection of investors. Frequency of interest payments will be Monthly, Annually or cumulative on maturity as per the choice of investors. Additional incentive of 0.25% is being offered to existing stakeholders, employees and Senior Citizens under series III, IV, VI, VII and IX. Allotment of these NCDs will be in dematerialized mode only. Application is to be made through ASBA mode only.

SEFL has posted total revenue and net profits of Rs.2613.88 cr. / Rs. 115.26 cr. (FY16), Rs. 2493.33 cr. / Rs. 148.84 cr. (FY17) and Rs. 3309.54 cr. / Rs. 263.49 cr. (FY18). For first half of FY19 it has earned net profit of Rs. 199.01 cr. on total revenue of Rs. 2280.42 cr. Thus is has shown upside movement in top and bottom lines for all these periods. Its Net NPAs stood at 1.99%, 1.76% and 1.30% for FY16 to FY18 respectively and was 2.41% for the Q1 of FY19 ended on 30.06.18. Its debt equity ratio as of 30.06.18 of 7.09 will rise to 7.19 post this issue. 

Conclusion / Investment Strategy

Investors looking for steady regular income may consider investment in secured instruments for medium term in this AA/Stable rated NCD issue

Review By Dilip Davda on Dec 18, 2018

Review Author

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. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The SREI Equipment Finance NCD Dec 2018 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if SREI Equipment Finance NCD Dec 2018 worth investing. The SREI Equipment Finance NCD Dec 2018 Note sets the NCD expectations in systematic way which tells you if SREI Equipment Finance NCD Dec 2018 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in SREI Equipment Finance NCD Dec 2018 by providing NCD recommendations i.e. subscribe, avoid and neutral.