9.75% SREI Equipment Finance NCD – January 2017 – Should you Invest?

SREI Equipment Finance has come out with public issue of non-convertible debentures (NCD) offering up to 9.75% interest rate. The issue opens on January 3 and closes on January 20, 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: January 3 – 20, 2017
• Annual Interest Rates for Retail Investors: 8.81% to 9.75% 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+” (Outlook Stable) by “BRICKWORK” &  “AA/Stable” by SMERA Ratings Limited
• NCD Size: Rs 250 crore with option to retain over-subscription upto Rs 500 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 Read – Know NCD – Investment Tips, TDS and Taxation

SREI Equipment NCD – Investment Options:

There are 7 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 – 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. The credit rating is AA+/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 2% higher than your regular FDs

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. 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 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.