SREI Infra Tranche-I April 2019 NCD issue review (Apply)

SIFL taping 11^th time with debt issue since 2011-12.
Issue is rated BWR AA+.
The company has a shelf limit of Rs 1500 crore.
Investment may be considered for long term steady regular income.

About Company:

SREI Infrastructure Finance Ltd. (SIFL)., entered the segment of infrastructure financing in 1989 in a limited capacity as a construction equipment financier. During the pre-liberalization era India's infrastructure segment was largely dominated by few players with negligible role for private sector players. The economic liberalisation in 1991 widened the opportunity for Srei Infra to mobilize resource and fund larger number of customers across regions. Srei Infra persisted through the ups and downs of the business cycles emerged as one of the strong players in the infrastructure financing space with an over 25 years track record of performance and credentials.

The Company was initially registered with Reserve Bank of India on August 1, 1998 as a deposit taking Non-Banking Financial Company, In April 2010, the Company decided to convert itself in to Non-Deposit Taking NBFC in order to qualify for registration as an 'Infrastructure Finance Company' and hence the Company decided not to accept or renew public deposits w.e.f April 20, 2010. Currently, SIFL has been classified as Infrastructure Finance Company (NBFC-ND-SI) w.e.f March 31, 2011. On September 26, 2011 the Company was notified as a Public Financial Institution (PFI) by the MCA.

Having started taping debt market in 2011-12, this is the 11^th debt offer from the company so far.

Debt Offer Details:

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), SIFL is coming out with debt offer of Secured and Unsecured Redeemable Non-Convertible Debentures of Rs 1000 each for Rs 100 crore with a green shoe option to retain oversubscription to the tune of Rs 400 crore making the total issue size of Rs 500 crore (against shelf limit of Rs 1500 cr.) under Tranche-I.. Issue opens for subscription on 09.04.19 and will close on or before 09.05.19. 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 issue is rated as BWR AA+ (Double A plus) by Brickwork Ratings India Pvt. Ltd. These rating indicate 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 Karvy Investor Services Ltd. and SMC Capitals Ltd, while Karvy Fintech Pvt. Ltd. is the registrar to the issue. Catalyst Trusteeship Ltd. is the debenture trustee.

These NCDs have tenures of 400 days, 3 years and 5 years. 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 as per the choice of investors. Allotment of these NCDs will be in dematerialized mode only. Application is to be made through ASBA mode only.

The terms of the NCDs offered pursuant to the Tranche 1 Issue are as follows:

SREI Infrastructure NCD Terms

Series	I	II	III	IV***	V	VI	VII	VIII
Frequency of Interest Payment	NA	Annual	Monthly	Annual	NA	Monthly	Annual	NA
Nature of Instruments	Secured NCD		Secured NCD			Secured NCD
Tenor from Deemed Date of Allotment	400 days		3 years			5 years
Minimum Application	Rs 10,000/- (10 NCDs) across all Series collectively
Face Value/Issue Price of NCDs (`/ NCD)	Rs 1,000/- (1 NCD)
In Multiples of (`) thereafter	Rs 1,000/- (1 NCD)
Coupon (% per annum) for Category I, Category II & Category III Investor(s)	NA	9.75%	10.05%	10.50%	NA	10.25%	10.75%	NA
Effective Yield (per annum) for Category I, Category II & Category III Investor(s)	9.81%	9.84%	10.52%	10.53%	10.51%	10.74%	10.76%	10.75%
Mode of Interest Payment	`Through various modes available.
Amount (`/NCD) on Maturity for Category I, Category II & Category III Investor(s)	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,000	Rs 1,350	Rs 1,000	Rs 1,000	Rs 1,667
Maturity Date (from Deemed Date of Allotment) llotment)	400 days		3 years			5 years

*** Our Company shall allocate and allot Series IV NCDs wherein the Applicants have not indicated their choice of the relevant NCD Series.

Financial Data:

For last three fiscals, SIFL has (on a consolidated basis) posted total revenue/net profits of Rs 2862.10 cr. / Rs 61.53 cr. (FY16), Rs 3459.79 cr. / Rs 242.76 cr. (FY17) and Rs 3989.55 cr. / Rs 399.73 cr. (FY18). For these fiscal ends, it's Net NPAs stood at 3.09%, 2.00% and 1.75% respectively.

For the first nine ended on 31.12.18 it has earned net profit of Rs 341.93 cr. on a total revenue of Rs 4809.02 cr. Post issue, its current debt equity ratio of 4.72 ( as on 31.12.18) will stand enhanced to 5.22.

As on 31.12.18, SIFL has a total AUM of Rs 49913 cr., paid up equity capital of Rs 503.24 crore and a net worth of Rs 4195 cr.

Conclusion / Investment Strategy

Considering rating, and standing of this group in the northern region, issue is worth considering. Investors may consider investment for long term for steady income. (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on April 7, 2019

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 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

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