RETAIL RESEARCH

Secured Taxable NCD Issue

06 Sep 2016

SREI Infrastructure Finance Ltd Product note

Summary:
SREI Infrastructure Finance Limited has come up with the 1st tranche of Secured Redeemable Non Convertible Debentures (NCDs) of face value of Rs. 1,000 each for an amount
of Rs. 250 crores (Base issue Size) with an option to retain oversubscription upto Rs. 750 crore - for a total amount aggregating upto Rs. 1000 crore (Shelf limit).
The issue will open for subscription from September 07, 2016 to September 28, 2016 (The Company has the option of closing the issue on an earlier date, once it receives the
amount it has targeted). The company will be paying an interest ranging between 9.08% p.a to 10% p. a. on these bonds.
The proposed NCDs issue has been rated BWR AA+ (BWR Double A plus)by Brickwork Ratings India Private Limited (BRICKWORK). Instruments with this rating are
considered to have high degree of safety regarding timely servicing of financial obligations.
Objects of the Issue: The funds raised through this Issue, will be used for the purpose of lending/ repayment of loan: minimum 75% of the net amount raised and 25% of the
net amount will be used for General Corporate purpose.
Issue Terms:
Issuer
Issue
Tranche 1 Issue Size
Type of Instrument
Face Value and issue price (in Rs / NCD)
Minimum Application
Stock Exchanges for listing
Issuance
Trading
Trading Lot
Call / Put options
Rating
Security

Srei Infrastructure Finance Limited

Public Issue of Secured, Redeemable, Non-Convertible Debentures of face value of Rs. 1,000 each aggregating up to Rs 1000
million (shelf limit)
Base Issue Size of Rs. 250 crore with an option to retain oversubscription up to Shelf Limit i.e. upto Rs. 1000 crore.
Secured Redeemable Non Convertible Debentures
1,000
Rs. 10,000 (10 NCDs) and in multiple of Rs. 1,000 (1 NCD) thereafter across all Series
NSE & BSE
Both physical and dematerialized form
Compulsorily in dematerialized form
1 (one) Bond
Nil
BWR AA+ (BWR Double A plus)by Brickwork Ratings India Private Limited (BRICKWORK)
The principal amount of the NCDs to be issued in terms of the Tranche 1 Prospectus together with all interest due on the NCDs
in respect thereof shall be secured by way of first charge in favour of the Debenture Trustee on specific future
receivables/assets and first pari passu charge on an identified immovable property of SREI Infrastructure Finance Ltd as may be
decided mutually by the Company and the Debenture Trustee. SREI will create appropriate security in favour of the Debenture
Trustee for the NCD Holders on the assets adequate to ensure 100% asset cover for the NCDs (along with the interest due
thereon), which shall be free from any encumbrances.

Issue Details:
Series
Frequency of Interest Payment
Tenor
Coupon (%) for NCD Holders in Category I, II and Category III
Effective Yield (per annum ) Category I, II and Category III
Amount (Rs / NCD) on Maturity for Category I, Category II & Category III

IV

I
Cumulative
400 Days
NA

II
Monthly
3 years
9.35%

III
Annual
3 years
9.75%

Cumulative
3 years
NA

V
Monthly
5 Years
9.60%

VI
Annual
5 Years
10.00%

VII
Cumulative
5 Years
NA

9.08%
Rs 1100

9.76%
Rs 1000

9.82%
Rs 1000

9.75%
Rs 1322

10.02%
Rs 1000

10.04%
Rs 1000

10.00%
Rs 1611

Who can apply?

Category I: (Institutional Category)

Public financial institutions, statutory corporations, scheduled commercial banks, co-operative banks Indian multilateral and bilateral development financial institution
and regional rural banks, which are authorized to invest in the NCDs;
Provident funds, pension funds, superannuation funds and gratuity funds, which are authorised to invest in the NCDs;
Venture Capital Funds/ Alternative Investment Fund registered with SEBI;
Insurance Companies registered with IRDA;
Insurance funds set up and managed by the army, navy, or air force of the Union of India;
Insurance funds set up and managed by the Department of Posts, the Union of India;
National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India;
State industrial development corporations; and
Mutual Funds.

Category II: (Non - Institutional Category)

Companies within the meaning of section 2(20) of the Companies Act, 2013; statutory bodies corporations and societies registered under the applicable laws in India and
authorised to invest in the NCDs;
Trusts including Public/private charitable/religious trusts which are authorized to invest in the NCDs;

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Scientific and/or industrial research organizations, which are authorized to invest in the NCDs;
Partnership firms in the name of the partners;
Limited Liability Partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of 2009);
Association of Persons; and
Any other incorporated and/ or unincorporated body of persons.

Category III: (Individual Category)

Resident Indian individuals; and
Hindu Undivided Families through the Karta.
Who can not apply?
The following categories of persons, and entities, shall not be eligible to participate in the Issue and any Applications from such persons and entities are liable to be rejected.

Minors without a guardian name*(A guardian may apply on behalf of a minor. However, Applications by minors must be made through Application Forms that contain the
names of both the minor Applicant and the guardian); Applicant shall ensure that guardian is competent to contract under Indian Contract Act, 1872
Foreign nationals, NRI inter-alia including any NRIs who are (i) based in the USA, and/or, (ii) domiciled in the USA, and/or, (iii) residents/citizens of the USA, and/or, (iv)
subject to any taxation laws of the USA;
Persons resident outside India including without limitation Foreign Institutional Investors, Foreign Portfolio Investors, Qualified Foreign Investors and Overseas Corporate
Bodies.
Persons ineligible to contract under applicable statutory/regulatory requirements and
Any category of investor other than the Investors mentioned in categories I, II and III.

Basis of Allotment:
Applicants belonging to all three Categories will be allocated as given in the table below:
Particulars
Reservation for each Portion

Category I
20% of the Overall Issue Size

Category II
20% of the Overall Issue Size

Category III
60% of the Overall Issue Size

Note:
Applicants belonging to these categories will be allotted in the first instance on first come first serve basis (determined on the basis of date of upload of the Applications on the
electronic Application platform of the relevant stock exchanges). In case of an oversubscription in any of the Portions, Allotments to the maximum extent, as possible, will be
made on a first-come first-serve basis and thereafter on proportionate basis in each portion, i.e. full Allotment of Bonds to the Applicants on a first come first basis up to the
date falling 1 (one) day prior to the date of oversubscription and proportionate allotment of Bonds to the Applicants on the date of oversubscription (based on the date of
upload of each Application on the electronic Application platform of the relevant stock exchanges, in each Portion).
Credit Rating:
The NCDs have been rated BWR AA+ (BWR Double A plus)by Brickwork Ratings India Private Limited (BRICKWORK) pursuant to letters dated June 19, 2013, July 21, 2014 and
August 6, 2014 and all of which have been revalidated vide revalidated by letters dated August 23, 2016. Instruments with a rating of BWR AA+ (BWR Double A plus) by
BRICKWORK are considered to have high degree of safety regarding timely servicing of financial obligations.
Interest on application Money: On Allotment 8% p.a.
Interest on Refund: 6% per annum.
Liquidity and Exit Options: The Bonds are proposed to be listed on the NSE & BSE.
Company Background:
SREI Infrastructure Finance entered the segment of infrastructure financing in 1989 in a limited capacity as construction equipment financier. It persisted through the ups and
downs of the business cycles emerged as one of the strong players in the infrastructure financing space with an over 25 year track record of performance and credentials. The
business model of the Company encompasses providing financial products and services for its customers engaged in infrastructure development and construction, with
particular focus on power, road, telecom, port, oil and gas &special economic zone sectors in India with a medium to long term perspective. SREI being an IFC, by accessing long
term funding resources can optimise its funding structure by way of issuing long term infrastructure NCDs, raising external commercial borrowings and issuing of debentures to
Foreign Institutional Investors thereby expanding its financing operations while maintaining its competitive cost of funds.
With a large customer base and over Rs 367,028.30 million of Consolidated Assets under Management as at March 31, 2016 and over Rs 353,880.10 million of Consolidated
Assets Under Management as at March 31, 2015, SREI Group has a pan-India presence with a network of 99 offices. In over 25 years of operation, it has empowered large
number of entrepreneurs through its bouquet of services in the infrastructure sector: infrastructure project finance, advisory and development, infrastructure equipment
finance, venture capital, capital market, equipment rental, integrated rural network of Common Services Centres (CSCs), insurance broking, SEZ and industrial park and
Environment Management. SREI had also partnered with BNP Paribas Lease Group, a wholly owned subsidiary of BNP Paribas, France to form a 50:50 joint venture entity, Srei
Equipment Finance Limited (SEFL), to capitalise on the equipment financing business in India. It currently operates one office in Germany involved in financial advisory
services.
Srei was among the few Indian NBFCs to have accessed the international market for funds and to have been listed on the London Stock Exchange. Many multilateral institutions
including KfW & DEG Germany (Financial Institutions owned by the Government of Germany), FMO (Financial Institution owned by the Government of Netherlands), BIO

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(Financial Institution owned by the Government of Belgium), FINFUND (Financial Institution owned by the Government of Finland), Nordic Investment Bank, UPS Capital
Business Credit, PROPARCO, OeEB (Development Bank of Austria), European Bank (EIB) etc. had invested in Srei Group.
The total income of SREI on a standalone basis for the year ended March 31, 2016 and March 31, 2015 was Rs 18,963.30 million and Rs 19,000.30 million respectively and the
loans outstanding (gross of provisions) as at March 31, 2016 and as at March 31, 2015 were Rs 130,132.40 million and Rs1,17,489.10 million respectively and total
disbursements for the year ended March 31, 2016 and March 31, 2015 and March 31 2014 were Rs53,743.24 million, Rs 48,267.64 million and Rs 47,056.43 million respectively.
Srei Group has registered disbursement for Rs 145,326.35 million, Rs 125,460.14 million and Rs 127,055.50 million for year ended March 31, 2016, year ended March 31, 2015
and year ended March 31, 2014 respectively.
OPERATIONS OF SREI GROUP
Srei Group is involved in the following businesses which are categorised as fund based, fee based and strategic investments.
FUND BASED BUSINESS
Infrastructure Equipment Finance - Srei Equipment Finance Limited (SEFL) SEFL, which was earlier a 50:50 joint venture between Srei Infrastructure Finance Limited and BNP
Paribas Lease Group, is registered with the RBI as a Non-Deposit Taking NBFC (Category - Asset Finance) and is in the business of equipment financing. SEFL has emerged as one
of the major construction equipment financiers in India by specialising in the infrastructure and construction equipment space and continues to grow with consistency and
follows prudent credit practises. It has long relationships with its customers and manufacturer partners.
Project Financing
The project finance segment of Srei provides customized financing to infrastructure projects and their sponsor companies. Srei seeks to distinguish the products and services of
its project finance segment from those of its competitors by customizing each of its offerings to the specific requirements of its customers and their projects, provide efficient
transaction processing and management capabilities and act as a single point of contact for all of its customers project financing requirements.
International Business Operations
Sreis associate Company, in Germany, is mainly involved in conception and implementation of domestic and international projects including financing and all necessary and
useful transactions related therewith, leasing and letting of movable assets and equipments, in particular for infrastructure projects;.
FEE BASED BUSINESS
Infrastructure Project Development:
The Infrastructure Project Development (IPD) vertical at Srei Infra sponsors PPP ventures and / or business in road sector in our country. These projects are a diversified mix of
annuity and toll-based projects and have been awarded by the National Highway Authority of India (NHAI) under National Highways Development Programme (NHDP), Ministry
of Road Transport & Highways and various state governments.
Infrastructure Project Advisory
Srei is capitalising on its comprehensive knowledge of the infrastructure business and empowering development agencies in both the private and public sector to lay the
foundations for a better tomorrow. Its longstanding presence in almost all the sectors in the infrastructure industry continues to open new avenues for rapid growth.
Investment Banking
Srei Capital Markets Limited is one of the merchant bankers in India to provide a wide gamut of services from initial public offers (IPOs), delisting, buy-back, open offers,
debenture placement to private placements of equity, debt syndication and merger and acquisition advisory.
Private Equity & Venture Capital
As a player in the infrastructure financing space and to complete the value chain for its clients, Srei decided to offer its services in the equity space as well.
Insurance Broking
Srei Insurance Broking Private Limited (SIBPL) is IRDA approved insurance broker with a composite broking license (it can sell both Life Insurance & General Insurance product
plus it is also into reinsurance business).
STRATEGIC INVESTMENTS
Srei has several strategic investments in infrastructure and financial services space. These are all long term investments held for long term returns. These include businesses in
Road BOT, Telecom Infra, Rural IT, SEZ/Industrial Park, Environment management etc.
Financial Performance:
(Rs Million)

Parameters
Net worth
Total Debt
of which Long Term Borrowing
Short Term Borrowing
Current Maturities of Long Term Borrowing
Fixed Assets(Tangible Assets+ Intangible Assets+ Capital work in Progress)
Non Current Assets
Cash and Cash Equivalents
Current Investments
Current Assets
Current Liabilities
Assets Under Management
Off Balance Sheet Assets
Income from Loans/Financial Assets
Finance Cost
Provisioning & Write-offs
Profit After Tax
Gross NPA (%)
Net NPA (%)*
Tier I Capital Adequacy Ratio (%)
Tier II Capital Adequacy Ratio (%)

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Fiscal 2016
35390.90
206,726.80
62,126.00
121,011.80
23,589.00
14,319.70
162,408.70
6,641.50
151.70
71,854.80
8,552.70
367,028.30
29,356.50
28,620.90
23,107.50
2,724.80
615.30
4.02
3.09
12.51%
5.03%

Fiscal 2015
34,813.60
203,257.60
68,041.80
113,574.50
21,641.30
15,513.40
152,695.30
5,747.60
202.80
74,780.10
6,138.30
353,880.10
20,533.90
26,964.70
22,741.50
3,098.30
1,214.00
4.71
3.84
11.21%
5.76%

Fiscal 2014
33,719.70
197,673.00
71,036.60
106,085.70
20,550.70
17,146.30
138,643.90
5,637.20
3,433.60
76,975.20
5,954.40
340,699.85
20,391.90
26,832.10
23,502.80
1,759.80
1,375.10
3.25
2.75
10.69%
7.09%

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Risks & Concerns:
As an NBFC, the risk of default and non-payment by borrowers and other counterparties may materially and adversely affect its profitability and asset quality.
Any increase in or realization of its contingent liabilities could adversely affect its financial condition.
SREI may be exposed to potential losses due to a decline in value of assets secured in its favour, and due to delays in the enforcement of such security upon default by its
borrowers which may have a material and adverse effect on its business, future financial performance and results of operations.
SREI derives majority/substantial of its revenues from its top 20 borrowers. Its inability to maintain relationship with such borrower or any default and non-payment in
future or credit losses of its single borrower or group exposure where it has a substantial exposure could materially and adversely affect the business, future financial
performance and results of operations.
Faces increasing competition in the business which may result in declining margins if SREI is unable to compete effectively and as a result its business, future financial
performance and results of operations could be materially and adversely affected
Failure or inaccurate appraisal of credit or financial worth of clients by employees may adversely impact the business.
Business requires substantial funding, and any disruption in funding sources would have a material and adverse effect on its liquidity and financial condition.
Any downgrade of credit ratings would increase borrowing costs and constrain its access to capital and lending markets and, as a result, would negatively affect its net
interest margin and its business.
Indebtedness and restrictive covenants imposed by its financing agreements could restrict its ability to conduct the business and operations.
SREIs investments can be particularly volatile and may not be recovered.
Private sector infrastructure industry in India, the sector on which SREI focus is still at an early stage of development and is linked to the continued growth of the Indian
economy. In the event that Central and State government initiatives and regulations in the infrastructure industry do not proceed in the desired direction, or if there is any
downturn in the macroeconomic environment in India or in specific sectors, its business, future financial performance and results of operations could be materially and
adversely affected.
Material changes in the regulations that govern SREI and its borrowers could cause its business to suffer.
SREI is affected by volatility in interest rates for both its lending and treasury operations, which could cause its net interest income to decline and adversely affect its return
on assets and profitability.
SREIs success depends in large part upon its management team and skilled personnel and its ability to attract and retain such persons.
SREI results of operations could be adversely affected by any disputes with its employees.
SREIs business is based on the trust and confidence of its customers; any damage to that trust and confidence may materially and adversely affect its business, future
financial performance and results of operations.
SREI may experience difficulties in expanding its business into new sectors and other geographical regions.
Any downgrading in credit rating of its NCDs may affect the trading price of the NCDs.
Changes in interest rates may affect the price of SREIs NCDs.
SREIs growth depends on the sustained growth of the Indian economy. An economic slowdown in India and abroad could have a direct impact on its operations and
profitability.
SREIs growth depends on its ability to handle risks associated with its business some of which are beyond its control and if they materialize, could have a material and
adverse effect on its business, future financial performance and results of operations.

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herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities
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Disclaimer: HDFC Bank (a shareholder in HDFC Securities Ltd) is associated with this issue in the capacity of one of the Bankers to the issue and will earn fees for its services. This report is prepared in the normal
course, solely upon information generally available to the public. No representation is made that it is accurate or complete notwithstanding that HDFC Bank is acting for SREI Infrastructure Finance Ltd. This report is not
issued with the authority of SREI Infrastructure Finance. Readers of this report are advised to take an informed decision on the issue after independent verification and analysis.

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