With RBI cutting rates for the second consecutive time last week, investors are looking at options for getting higher returns. With probability of deposit rates moving upwards in the near term remaining low, non-convertible debenture (NCD) issues are offering good options, especially the ones with appetite for some risk to earn higher returns.
Srei Infrastructure Finance Limited (SREI) is proposing a public issue of secured redeemable NCDs offering the highest coupon of 10.75 per cent annually for investors of all categories for a five-year tenor, the company said.
The tranche 1 issue opens for subscription on April 9, 2019 and closes on May 9, 2019 with a base issue size of Rs 100 crore. The issue of Rs 1,000 face value comes with an option to retain oversubscription up to Rs 400 crore, amounting to Rs 500 crore within the shelf limit of Rs 1500 crore.
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“In light of the recent rate cut of 25 basis points by RBI, well priced NCDs have become a preferred choice of retail investors. With a strong legacy of several decades Srei has consistently worked to live up to the trust and interest of our stakeholders and investors. We are also committed towards deepening of the corporate bond market and we expect a good demand for our latest offering,” Rakesh Bhutoria, CEO, SREI said.
Brickwork Ratings the credit rating of BWR AA+ with a stable outlook.
The highest coupon of 10.50 per cent annually is being offered for all categories of investors for a three-year tenor. For a 400-day tenor, 9.75 per cent is the highest coupon per year. An additional coupon of 0.25 per cent will be offered to all category investors who are existing shareholders of the company NCDs or bondholders of both SREI and SREI Equipment Finance and senior citizens.
Additional coupon is not applicable for series of 400-day tenor irrespective of any category of investors. The NCDs would be listed on the BSE.
Karvy Investor Services Limited, SMC Capitals Limited and SREI Capital Markets Limited are the lead managers.
Even though NCDs are more in demand as they offer higher yields, there is higher risk asosciated with them. Secured NCDs are safer than unsecured ones, but offer higher returns as well. NCDs typically offer 200-250 basis point higher returns than the bank FDs at any point in time.