IFCI NCD 2014

State-run NBFC IFCI has come out with its public issue of secured, redeemable, non-convertible debentures of face value of Rs 1000 each for an amount aggregating up to Rs 2000 crore. The issue is going to open for subscription on October 20 which has scheduled to close on November 21, 2014. Proceeds from the issue will be utilised towards lending minimum 75 percent of the amount raised and allotted in the issue; and for general corporate purpose: upto 25% of the amount raised and allotted in the issue. Axis Trustee Services Limited is the book running lead manager and Karvy Computershare Private Limited is a registrar to the issue.

IFCI Ltd (formerly known as Industrial Finance Corporation of India Ltd) is a Government of India promoted and controlled finance Sector Company that is coming out with its maiden debt offer.

IFCI Ltd is notified as a public financial institution within the meaning of Section 2(72) of the Companies Act, 2013. Further, the Company has also been registered as Systematically Important Non-Deposit taking Non-Banking Finance Company (NBFC-ND-SI) with the Reserve Bank of India and has been issued a certificate of registration bearing No. B-14.00009 dated August 18, 2009.

To part finance its debt restructuring and repayment of loans, the company is issuing Secured and Redeemable Non Convertible Debentures having a face value of Rs. 1000 each. This is the maiden debt offer from this finance PSU.

This is a public issue by the Company for an amount of Rs. 250.00 crore with an option to retain over subscription up to the Shelf Limit (i.e Rs. 2,000.00 crore). The Net Issue proceeds as raised through the Tranche- I Issue less the expenditure will be utilized for the purpose of lending/ repayment of loan: minimum 75% of the net amount raised and allotted in the Tranche- I Issue; and for General Corporate purpose: upto 25% of the net amount raised and allotted in the Tranche- I Issue. The unutilized amount if any will be used for purpose of lending/ repayment of loan.

Issue opens for subscription on 20.10.14 and will close on or before 21.11.14 depending on response. These NCDs have tenure of 5, 7 and 10 years and coupon rates ranging from 9.40% to 9.90% with an additional incentive of 0.10% to category III and IV (i.e. HNIs and Retail Investors) giving yield ranging between 9.90% to 10%. These NCDs has Monthly, Annual and Maturity value interest/payment mode.
Minimum application is to be made for 10 NCDs and in multiple of 1 thereon, thereafter. NCDs are available in demat as well as physical mode, however, trading will take place only for demat mode. Post allotment NCDs will be listed on BSE and NSE. The allotment will be made on "First Come, First Served basis".

This offer has been graded as BWR AA- (Stable) indicating the high degree of safety regarding timely servicing of financial obligations and such instruments carry very low credit risk, and ICRA A (Stable) indicating adequate degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk.

Issue is lead managed by SBI Capital Markets Ltd, A K Capital Services Ltd, Edelweiss Financial Services Ltd and RR Investors Capital Services Pvt Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue and Axis Trustee Services Ltd is the Debenture Trustee.

As inflation has cooled down, rate cut is now round the corner. Hence this offer can be considered for long term investment.

Research Report on KEC International Ltd

Research Report on KEC International Ltd 

CMP 103     TGT  125      Return : 21%

T&D spending set to intensify

Investments in the Transmission & Distribution (T&D) sector have lagged

investments in power generation over the last 5 years. Transmission line

additions have been declining yoy since FY11 due to lower spending by the

private sector. This in turn has led to congestion in the domestic transmission

network and has impacted power generation at many plants. However, the

trend has changed in FY15 as capacity additions in transmission lines doubled

YTD FY15. We believe orders from Power Grid would increase from FY16 as it

is expected to commission large projects in FY15. Strong presence in domestic

market and vendor restriction by Power Grid would aid KEC to gain market

share going forward. The company has also ventured into the export market

and has a strong foothold in MENA, Americas and CIS countries.

Revenue growth to gain momentum from FY16E

KEC's order book at the end of Q1 FY15 stood at Rs103bn, up 2.7% yoy, with

BTB of 1.3x. For FY15, the company expects order intake to improve 8‐10%

yoy. In the international market it has already announced order inflow of

Rs10.3bn in Q2 FY15 and expects order inflows from the domestic market to

rise from H2 FY15. International orders accounted for 59% of the total order

book for the company, higher from 49% at the end of FY13. FY15 order inflow

growth could be lower than management guidance at 7% as we expect order

inflow momentum to pick up only from FY16. We estimate order inflow

growth at 15% post FY15 led by a recovery in the domestic market.

Earnings growth to surge over FY14-16E

KEC managed to report revenue CAGR of 20.9% over FY11‐14 on the back of

its diversification exercise. However, margins for the company remained

under pressure. We believe that margins for KEC have formed a trough and

would expand going ahead due to execution of legacy orders by Q2 FY15 and

higher share of transmission orders of total order book. We expect debtor

days to decline over the next two years leading to a decline in interest costs.

Earnings CAGR of 71% over FY14‐16E is being supported by faster execution,

margin expansion and lower finance costs. KEC stock price has corrected by

~25% over the last 2‐months and valuations appear attractive at 9.6x FY16

earnings, given the strong growth in earnings over FY14‐16E.

Research report on Bajaj Electricals Ltd

Research report on Bajaj Electricals Ltd BUY

CMP Rs270, Target Rs320, Upside 18.50%

- BJE order book rises 50% YTD
- E&P business to turnaround from H2 FY15
- Core business performance to improve

BJE order book rises 50% YTD

Bajaj Electricals (BJE) has bagged large orders in the last one quarter from
power distribution and transmission space. Order inflow for the company has
been quite strong over the last few months as spending in power
infrastructure have intensified. Order book has increased ~50% since the start
of the year to Rs34bn. On the back of strong order book, the company
expects to register +25% yoy revenue growth over the next two years. For the
rest of the year, the company expects momentum to pick up, registering
quarterly revenues of Rs3bn, Rs4bn and Rs6bn linearly. We estimate revenue
from E&P business to increase from Rs11.5bn in FY14 to Rs14.4bn in FY15,
Rs18.7bn in FY16 and Rs24.2bn in FY17 led by strong order book, faster
execution and increased domestic infrastructure spending.

E&P business to turnaround from H2 FY15

Engineering and Projects (E&P) business performance has been below par on
account of (1) aggressive bidding (2) execution slippages (3) inefficient
monitoring and (4) slowdown in domestic order inflows. In FY14, BEL closed
most old sites and indicated that most of the provision regarding receivables
and cost escalations is already provided for in FY14. Given the closure of most
of the old sites and new order book gained at a minimum threshold margin,
the segment is expected to report a turnaround at EBIT level from H2 FY15.
Expansion in margins would also be aided by the strong growth in revenue.
We estimate EBIT margin to remain at 3% in FY15 (lower than management
guidance of 5‐6%) and to improve to 5.5% in FY16 and 6.5% in FY17.

Core business performance to improve

Consumer and lighting segment witnessed lower growth due to weak
demand in some products and demand slowdown. The company expects
most of the segments except CFL to register strong growth going forward led
by expanding its product reach into semi urban markets and higher
advertisement spending. BEL also plans to revamp its Morphy Richards
product portfolio to boost sales with new models in the premium segment.
We expect both the division performance to improve from current levels and
witnesses an EBIT CAGR of 20% over FY14‐17E. At the CMP, the company is
trading at 12.1x FY16 earnings, quite lower than its peers Havells and V‐Guard
and attractive considering the strong growth in earnings.