Srei Infrastructure Finance NCD: A Detailed Overview

Srei Infrastructure Finance Limited, a non-banking financial company (NBFC), has been a prominent player in the Indian infrastructure finance sector. The company has frequently tapped the market with Non-Convertible Debentures (NCDs) to raise capital for its lending activities. These NCDs are debt instruments that offer fixed returns over a specified period, making them an attractive investment option for risk-averse investors looking for stable income.

Key Features of Srei NCDs

• Fixed Income: NCDs provide a fixed rate of interest, offering predictable returns to investors. The interest rate is typically higher than traditional fixed deposits, making them an appealing alternative.
• Tenure Options: Srei typically offers NCDs with varying tenures, catering to different investment horizons. Common tenures range from 3 to 5 years.
• Credit Rating: It’s crucial to note that Srei’s credit rating has been a point of concern. Potential investors should carefully evaluate the rating assigned by credit rating agencies like CRISIL and CARE before investing. Lower ratings signify a higher risk of default.
• Security: NCDs can be secured or unsecured. Secured NCDs are backed by the assets of the company, offering a degree of safety. Unsecured NCDs, on the other hand, carry a higher risk as they are not backed by any specific assets. Srei’s NCDs have typically been secured.
• Liquidity: While NCDs are not as liquid as stocks, they can be traded on stock exchanges. However, the liquidity may be limited depending on the trading volume and investor demand.
• Tax Implications: Interest earned on NCDs is taxable as per the investor’s income tax slab. Additionally, capital gains arising from the sale of NCDs on the stock exchange are also subject to taxation.

Investment Considerations

Before investing in Srei NCDs, potential investors should carefully consider the following:

• Credit Rating: As previously mentioned, carefully assess the credit rating assigned to the NCD by reputable credit rating agencies. This will provide an understanding of the issuer’s ability to meet its financial obligations.
• Financial Performance of Srei: Evaluate Srei’s financial performance, including its profitability, asset quality, and debt levels. Understand the company’s business model and its exposure to the infrastructure sector.
• Risk Appetite: Assess your own risk tolerance and investment goals. NCDs are generally considered less risky than equity investments, but they are not entirely risk-free, especially if the issuer faces financial difficulties.
• Liquidity Needs: Consider your liquidity requirements. While NCDs can be traded on the stock exchange, selling them before maturity may result in a loss.
• Tax Implications: Understand the tax implications of investing in NCDs. Consult with a tax advisor to determine the most tax-efficient investment strategy.

Important Note (Current Status)

It is crucial to acknowledge that Srei Infrastructure Finance Limited has faced significant financial challenges and has been undergoing insolvency proceedings. Therefore, investing in any new NCD offerings (if any) would be exceptionally risky and requires extensive due diligence and expert financial advice. Potential investors should thoroughly research the current situation and exercise extreme caution.