9.60% SREI Equipment Finance NCD – April/May’18 – Should you Invest?

SREI Equipment Finance has come out with public issue of non-convertible debentures (NCD) offering up to 9.60% interest rate. The issue opens on April 25 and closes on May 16, 2018.

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

SREI Equipment Finance NCD – Significant Points:

• Offer Period: April 25 to May 16, 2018
• Annual Interest Rates for Retail Investors: 8.50% to 9.60% depending on tenure
• 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+” (BWR Double A Plus) (Outlook: Stable) and “SMERA AA+/Stable’ (SMERA Double A plus/Stable)”
• 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 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 11 options of investment in SREI Equipment Finance NCD.

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 – 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

Only Category III Investors can apply for allotment of NCDs in the physical form for Series IV, Series VII and Series X NCDs. However, Series I, Series II, Series III, Series V, Series VI, Series VIII, Series IX and Series XI NCDs would be allotted compulsorily in dematerialized form to all categories of Investors.

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 – SREI
3. The interest rates are 2% higher than your regular Bank FDs
4. No TDS if invested in Demat Form

Also Read: Highest Interest Rate on Recurring Deposits

Why you should not invest?

1. The interest rates trend is rising. In last two months SBI has raised its interest rate on fixed deposit by 0.75%. It seems like the interest rates would go up more in near future. Hence should not lock your investment for long term.
2. The profits of the company declined as compared to the previous year
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

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