Sakthi Finance launched its NCDs issue with a Credit rating of [ICRA] BBB (Stable)

Sakthi Finance is offering Secured, Redeemable, Non-Convertible Debentures (NCDs) with a face value of Rs 1000 each. The issue is open for subscription between June 20, 2024, and July 3, 2024. The minimum investment is Rs 10,000 (10 NCDs). The NCDs come in various tenors of 24, 36, 60, and 85 months and offer interest payout options like monthly and cumulative. Investors can choose from Series I to VII. The issue has a credit rating of [ICRA] BBB (Stable) by ICRA and will be listed on BSE. The debenture trustee for the issue is Catalyst Trusteeship Limited.

NCD Coupon Rates

Objective of the Issue

The company intends to utilize the net proceeds from the issue to fund onward lending, financing, and the repayment or prepayment of principal and interest on existing borrowings, including the redemption of NCDs due for redemption, as well as for general corporate purposes

Credit Rating

The NCDs proposed to be issued by the company are rated [ICRA] BBB (Stable) by ICRA Limited (ICRA).

Financial Performance

Over the last three fiscal years, the company has demonstrated steady financial performance. The total income and net profit figures for these years are as follows:

• FY21: Total Income of Rs. 171.34 crore and Net Profit of Rs. 9.26 crore
• FY22: Total Income of Rs. 181.35 crore and Net Profit of Rs. 9.52 crore
• FY23: Total Income of Rs. 191.94 crore and Net Profit of Rs. 12.49 crore

For the nine months ended December 31, 2023 (9M FY24), the company reported a net profit of Rs. 11.52 crore on a total income of Rs. 152.59 crore.

Regarding asset quality, the company’s Net Non-Performing Assets (NPAs) were as follows:

• December 31, 2023: 2.85%
• March 31, 2023: 2.95%
• March 31, 2022: 2.14%
• March 31, 2021: 2.30%

The debt-equity ratio was 6.16 as of December 31, 2023, and is expected to increase to 6.96 following the current debt issue. Additionally, as of the same date, the company’s capital adequacy ratio stood at 18.01%, supported by a paid-up equity capital of Rs. 64.71 crore and free reserves of Rs. 131.80 crore.

Conclusion

The corporation’s finance sector is the arm of Sakthi Group. The performance has been averaging for the periods under consideration. The bond, rated BBB, has a moderate degree of safety but also carries moderate credit risk. There is no harm in overlooking this offer of slightly risky indebtedness.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.