SREI Infra
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 to raise Rs. 75 crore with an option to retain another Rs 75 crore, taking the total fund raising to Rs. 150 crore.
Issue Details:
The issue opened on 4th April and will close on 25th April 2013, 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: ‘AA-’ by CARE and ‘AA’ by BRICKWORK indicating high degree of safety for timely servicing of financial obligations. In its previous NCD issue in September 2012, CARE had rated the then issue ‘AA’.
Listing: To be listed on BSE with one NCD comprising a trading lot. NCD would be issued both in demat and physical (for individual investors) form.
What’s on offer: The NCD issue has 6 investment options for individuals/HUF and 2 for institutions, as under:
| Particulars | Series I | Series II | Series III | Series IV | Series V | Series VI |
| Frequency of interest payment | Quarterly | Annual | Cumulative | Annual | Cumulative | Cumulative |
| Investors who can apply | Individual/HUF | Individual/HUF | Individual/HUF | All | All | Individual/HUF |
| Tenure | 3 years | 3 years | 3 years | 5 years | 5 years | 6.5 years |
| Coupon Rate (% pa) |
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| 10.35% | 10.75% | NA | 11.00% | NA | NA |
| NA | NA | NA | 11.00% | NA | NA |
| Effective Yield (% pa) |
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| 10.75% | 10.75% | 10.76% | 11.00% | 11.00% | 11.24% |
| NA | NA | NA | 11.00% | 11.00% | NA |
| Put Option | Nil | Nil | Nil | Nil | Nil | Nil |
| Redemption Amount (per NCD) |
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| Rs. 1,000 | Rs. 1,000 | Rs. 1,359 | Rs. 1,000 | Rs. 1,686 | Rs. 2,000 |
| NA | NA | NA | Rs. 1,000 | Rs. 1,686 | NA |
Company Background:
SREI Infrastructure Finance provides financial products and services to its about 30,000 customers engaged in infrastructure development and construction. For FY12, consolidated total income stood at Rs. 2,446 crore with PAT of Rs. 123 crore. For 9mFY13, consolidated total income was Rs. 2,303 crore and PAT Rs. 194 crore. As of 31st December 2012, company had AUMs of Rs. 33,580 crore. Its asset quality indicates gross NPAs of Rs. 111 crore and net NPAs of Rs. 100 crore, translating to net NPAs ratio of 0.71%.
Recommendation:
The current NCD issue carries very attractive returns across maturities. While yields of 10.75-10.76% for 3 years is good, 11% yields for 5 years is very favourable. No bank is offering over 10% interest rate for fixed deposits for 1-2 years, and only in single digits for longer tenures FDs. Moreover, the tax free bond issues of public sector enterprises have also closed last fiscal. In that backdrop, doubling of principle amount under the Series VI option is very attractive, yielding to effective yields of 11.24% in 6 years and 6 months.
However, one needs to take these interest rates with a pinch of salt as the legal tussle between SREI and India Ratings (formerly Fitch) in preventing the ratings agency from publishing the downgrade from A+ to AA- last year is well known, and the ratings for the issue are not the very best.
Thus, the Series VI issue is advised for investors having some risk appetite!