SREI Equipment Finance NCD Issue Should You Invest?

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Yet another time the leading non-banking finance company providing finance and other services to construction, mining, technological, healthcare, agriculture, railways and oil and gas sectors, has come up with an NCD issue. This time with a comparatively high yield in comparison to its peers coming up with the NCD issue.

SREI Equipment Finance NCD Issue  Should You Invest?

Why you should be investing in SREI Equipment Finance NCD Issue?

The issue has been open for subscription from 17th July 2017 to 31st July 2017. The high coupon rate on the NCD in a falling interest rate regime holds good for the NCD.

Details i.e size and objective of the issue- With an initial target to mop up Rs. 500 crore, the green-shoe option of additional Rs. 500 crore exists. The company plans to use 75% of the collected funds to be used in refinancing and lending activities while the remaining for its other corporate activities.

Coupon rate and Tenure- The issue comes with a coupon rate of 9.25% per annum payable on a month-on-month basis, 9.3% payable annually and on a cumulative basis for 5 years and 3 months.

For 7 years term, the coupon rate payable for 9.35% is payable month on month basis and 9.4% annually and cumulatively. The rates are highest in case of tenure of 10 years with an earning of 9.5% payable monthly or 9.55% annually.

Retail investors can make an investment with a minimum of Rs. 10000

Other factors supporting investment in SREI NCDs

Being unsecured these NCDs do are risky with respect to payments, nonetheless, credit rating companies including Brickworks and SMERA have rated it with a AA+ rating of stable outlook. Also, the sector is recovering fast with the improving economic outlook.

So, investors with a risk-appetite as well as who are there in the lower-tax bracket can consider investment in these instruments as any income from these NCDs is to be taxed as per the tax slab of the investor. Further if the annual interest from these NCDs is over Rs. 5000 and is maintained in physical form then there is TDS implications as well.

Further, time horizon is another consideration that needs to be factored, although through the exchange as well as early redemption investors are provided the much needed liquidity from the instrument. Also, if you want to be on a safer side and still bet on these NCDs with an attractive yield of 9.92%, choose the NCD issue with monthly pay-out option to lessen the risk.

Goodreturns.in

Story first published: Wednesday, July 19, 2017, 11:07 [IST]
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