9.55% SREI Equipment Finance NCD – July’17 – Should you Invest?

SREI Equipment Finance NCD - July 2017 - Should you Invest

SREI Equipment Finance NCD – July 2017 – Should you Invest?

SREI Equipment Finance has come out with public issue of non-convertible debentures (NCD) offering up to 9.55% interest rate. The issue opens on July 17 and closes on July 31, 2017.

SREI Equipment Finance is joint venture of SERI and BNP Paribas and deals with financing of Infrastructure equipment in organized sector.

SREI Equipment Finance NCD – Significant Points:

  • Offer Period: July 17 to 31, 2017
  • Annual Interest Rates for Retail Investors: 9.25% to 9.55% depending on tenure
  • Additional 0.15% interest (retail investors only – Category III) for SERI previous NCD holders (original allotted only), shareholders of SERI or senior citizens  or Existing Employees of SREI Infra on the Deemed Date of Allotment
  • Price of each bond: Rs 1,000
  • Minimum Investment: 10 Bonds (Rs 10,000)
  • Max Investment Limit for Retail Investor: Rs 10 Lakhs
  • Credit Rating: “BWR AA+” (Outlook Stable) by “BRICKWORK” &  “AA+/Stable” by SMERA Ratings Limited
  • NCD Size: Rs 500 crore with option to retain over-subscription upto Rs 1000 crore
  • Allotment: First Come First Serve
  • Listing: Bonds would be listed on BSE & NSE and will entail capital gains tax on exit through secondary market

Also ReadKnow NCD – Investment Tips, TDS and Taxation

SREI Equipment NCD – Investment Options:

There are 9 options of investment in SREI Equipment Finance NCD.

SREI Equipment Finance NCD - July 2017 - Investment Options

SREI Equipment Finance NCD – July 2017 – Investment Options

Also Read: 25 Tax Free Incomes & Investments in India

SREI Equipment Finance NCD – Who can Apply?

This issue is open to all Indian residents, HUFs and Institutions.

  • Category I – Institutional Investors – 30% of the issue is reserved
  • Category II – Non-Institutional Investors, Corporates – 20% of the issue is reserved
  • Category III – Retail Individual Investors including HUFs – 50% of the issue is reserved

However NRIs cannot apply for this NCD.

Why you should invest?

  1. AA+ Credit rating means very less likely hood of credit default
  2. Part of well known conglomerate – SERI
  3. The interest rates are better than your regular FDs
  4. No TDS if invested in Demat Form

Also Read: Highest Interest Rate on Recurring Deposits

Why you should not invest?

  1. The profits of the company declined as compared to the previous year
  2. The NCD is unsecured.
  3. There are NCDs available in secondary market which have higher yields with similar rating. The problem is low liquidity and hence is difficult to buy in large numbers.
  4. The present Tax Free Bonds are offering yields up to 6.5% in secondary market, which is better investment for People in highest tax bracket.
  5. You can also invest in high rated company fixed deposits

How to Apply?

You can apply online by ASBA facility provided by banks. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work.

Learn: How to apply for NCD issues using ASBA?

In case you don’t want to do it online, you can download the application form from company site or Financial Institutions and submit to collection centers.

Recommendation:

  1. My recommendation is to invest some part of your Fixed Income investment in this NCD Issue
  2. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
  3. Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value
  4. Remember the NCD is Unsecured which means it’s not backed by any company asset and in case company shuts down you would be last in queue of lenders to receive money

If you plan to invest in this issue, do it early as most good NCD issues are over-subscribed before the end date.

SREI Equipment Finance NCD - July 2017

SREI Equipment Finance NCD – July 2017

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