Sakthi Finance NCD offer review

The NBFC from south is revisiting with its second NCD offer this year. Last offer was in February-March 15. Sakthi Finance Ltd (SFL) is an asset finance company with primary focus on financing pre-owned commercial vehicles. It also provide finance for purchasing infrastructure construction equipment, multi-utility vehicles, cars, jeeps and other machinery. The finances provided are secured by lien on the assets financed. SFLs' target customers predominantly comprise Small /Medium Road Transport Operators (SRTOs/MRTOs) and primarily hail from rural/semi-urban area.

To meet its funding requirements for hire purchase finance and lendings, the company is coming out with a debt offer of Secured Redeemable Non-convertible Debentures having a face value of Rs. 1000 each to mobilize Rs. 100 crore with a green shoe option to retain 100% oversubscription thus making the aggregate size of the issue of Rs. 200 crore. Issue has already opened for subscription on 07.04.16 and will close on or before 06.05.16. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and 1 NCD thereon, thereafter. The allotment is available in demat as well as in physical mode, but trading will take place only in demat mode. The offer has tenure of 24,36 and 48 months and coupon rate ranging between 10.25% to 11%. Interest payment mode will be on monthly, annually and cumulative basis as per the choice of investors.

Issue is solely managed by Dalmia Securities Pvt Ltd and SKDC Consultants Ltd is the registrar to the issue. GDA Trusteeship Ltd is the debenture trustees. Issue is rates as ICRA/BBB (Stable) by ICRA indicating moderate degree of safety regarding timely servicing of financial obligations and carry moderate credit risk. Post allotment, NCDs will be listed on BSE.

In line with general trends of the industry, its NPAs have risen in past few quarters. Post issue its debt equity ratio will stand enhanced from 6.31 to 7.78. On performance front, the company maintained growth in its top and bottom lines for last three fiscals, but for first half of the current fiscal it appears to have lost the trends. For six months period ended 30.09.15 it has reported net profit of Rs.5.23 crore on a total income of Rs. 83.29 crore. For past three fiscals its top and bottom lines were Rs. 128.72 cr. / Rs. 14 cr. (FY13), Rs. 138.11 cr. / Rs. 14.16 cr. (FY14) and Rs. 150.62 cr. / Rs. 15.85 cr. (FY15).

Conclusion: Poor rating for this offer makes it a risky investment proposal and hence only risk savvy investors may consider this offer.

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.