Sakthi Finance Limited was incorporated in the year 1955 and has a track record of nearly four decades in commercial vehicle financing segment. They are registered with RBI, under Section 45-IA of the Reserve Bank of India Act, 1934, with Department of Non-Banking Supervision, Chennai, as a NBFC Deposit-taking -Investment and Credit Company (earlier termed as Asset Financing Company). They are part of 'Sakthi Group' of companies based in Coimbatore, South India, and a reputed and well-known Industrial conglomerate having major presence in sugar, industrial alcohol, automobile distribution, auto components, dairy, co-generation, wind energy and transportation. They are an Investment and Credit company with primary focus on financing pre-owned commercial vehicles. They 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. The target customers predominantly comprise Small / Medium Road Transport Operators ('SRTOs / MRTOs') and primarily hail from rural / semi-urban area. The SRTOs / MRTOs looks for speedy disposal of finance at competitive rates. They have identified this opportunity and positioned themselves between the organized banking sector and local money lenders by offering the finance at competitive rate with flexible and speedy lending services to the customers. They operate primarily in the Southern region of the country mainly in the States of Tamil Nadu and Kerala through the branch network and customer service points. They have network of 53 branches, located in Tamil Nadu, Kerala, Andhra Pradesh, Karnataka, Maharashtra, Haryana and Union Territory of Puducherry. In addition to finance business, they generate power from windmills and sell it to Tamil Nadu Electricity Board and Gujarat Urja Vikas Nigam Limited. At present, they have 17 windmills with an aggregate capacity of 5,150 kW located in the States of Tamil Nadu and Gujarat. As on September 30, 2023, they have an Asset Under Management (“AUM”) (i.e. Stock on Hire) of Rs 1,19,637.19 lakh. The AUM has grown from Rs 1,09,353.73 lakh as at March 31, 2021 to Rs 1,14,500.10 lakh as at March 31, 2023 at a CAGR of 2.33%. The income from hire purchase business constitutes about 94% of operating income of the Company for the FY ended March 31, 2023. For FY 2023, the income from hire purchase business was Rs 18,603.02 lakh as against Rs 16,446.30 lakh for FY 2021, registering a YoY growth of 13.11% and CAGR 4.19%. As on September 30, 2023 the gross Stage 3 Assets as a percentage of loan assets is 5.73% and Net Stage 3 Assets as a percentage of loan assets is 2.97%. The Gross Stage 3 Assets as a percentage of loan assets was 5.85%, 5.18% and 4.95% as at March 31,2023, March 31, 2022 and March 31, 2021 respectively. While Net Stage 3 Assets was 2.95%, 2.14% and 2.30% asat March 31,2023, March 31, 2022 and March 31,2021 respectively. As at March 31,2023, March 31,2022and March 31, 2021 the ECL as determined under Ind AS 109 was Rs 5,192.14 lakh, Rs 4,511.27 lakh, and Rs 3,632.73 lakh respectively. The capital adequacy ratio, computed on the basis of applicable RBI requirements, as on September 30,2023 is 17.26% The capital adequacy ratio as on March 31,2023, March 31, 2022 and March 31, 2021 were 19.68%, 21.66% and 22.52% respectively. This NCD is given ICRA BBB (Stable) by ICRA Limited and the instruments with this rating are considered to have moderate degree of safety and moderate credit risk. Also company has shown almost static results over the years. So, average rating and lucrative coupon rates make this offer an option for investors looking for long term fixed income. We give NEUTRAL rating to debt issue.
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