10.25% SREI Equipment Finance NCD – April 2015 – Should you Invest?

SREI Equipment Finance has come out with public issue of non-convertible debentures (NCD) offering up to 10.25% interest rate. The issue opens on April 9 and closes on April 30, 2015.

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

SREI Equipment Finance NCD – Significant Points:

• Offer Period: April 9 – April 30, 2015
• Annual Interest Rates for Retail Investors: 9.75% to 10.25% depending on tenure
• 0.25% additional interest would be payable to Senior Citizens and SERI /BNP employees
• 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: “CARE AA” by CARE, “BWR AA” (Outlook Stable) by “BRICKWORK”
• 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 Read – Know 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 – Who can Apply?

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

• Category I – Institutional Investors – 20% of the issue is reserved
• Category II – Non-Institutional Investors, Corporates – 20% of the issue is reserved
• Category III – Retail Individual Investors including HUFs – 60% of the issue is reserved

However NRIs cannot apply for this NCD.

Why you should invest?

1. The credit rating is AA which is good for investment purpose
2. The NCD is secured, which means the above debt is backed by assets of the company
3. The interest rates are better than your regular FDs

Why you should not invest?

1. The NPA has increased over the last year
2. The profits of the company declined as compared to the previous year
3. Muthoot Finance is offering NCD with up to 10.8% interest with marginal poor credit rating

How to Apply?

If you have Demat account apply through that. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work

In case you don’t have Demat Account, 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 is low and hence you would get lower than market value

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