Monday, August 4, 2014

D.S.KULKARNI DEVELOPERS NCD ISSUE REVIEW

 





Pune based Real Estate Development and Construction player D.S.Kulkarni Developers has come out with a Public Issue of Secured Redeemable Non convertible Debentures (NCD) to raise Rs.200 crores.


ISSUE DETAILS : 


The Company intends to utilise the proceeds of the NCD issue to fund its New Residential Township project planned on the Pune-Sholapur Road.
The issue is for Rs.200 crores.
The Face Value of the Debenture is Rs.5000 and the minimum application should be for 5 NCS i.e. Rs.25000/- . However, there is an option III wherein the Face Value of the NCD is Rs.25000.

The Issue opens on 4th of August and closes on 26th August.
D.S.Kulkarni Developers Limited NCD Series Details

Options
I
II
III
IV
Tenure 36 Months 66 Months 72 Months 84 Months
Frequency of Interest Payment Quarterly Cumulative Annually Monthly
Minimum Application value 25,000 25,000 25,000 25,000
Face Value of NCDs 5,000 5,000 25,000 5,000
Coupon (%) per annum in
Category I, II and III
12.50% N.A. 12.65% 12.75%
Coupon (%) for DSK
Employees,Shareholders, Senior Citizen Ex-servicemen and Women
12.75% N.A. 12.90% 13.00%
Coupon Type Fixed Fixed Fixed Fixed
Effective Yield
(per annum)Category I, II and III
13.10% 13.43% 12.65% 13.52%
Effective Yield
(per annum) DSK
Employees,Senior Citizen,and Women
13.37% 13.43% 12.90% 13.80%

Category I is Institutional Investors
Category II is Non-Institutional Investors
Category III is Individual Investors
80% of the Issue is reserved for Category III i.e, Retail Individual Investors



In the Cumulative Option, the Redemption amount will become exactly double of the Invested amount after 66 months.

COMPANY BACKGROUND :
D.S.Kulkarni Developers Ltd is a Pune based company in the field of Construction and Real Estate Development with proved Track Record. It has been a profit making company right since its inception.


SPECIAL FEATURES :
It is given that Additional Incentive is given for Senior Citizens, Servicemen, Ex-Servicemen Employees and Shareholders, but D.S.Kulkarni has taken 1 step further and is giving an additional 0.25% to even Women Investors, which is the First for any NCD issue in India!
Good social responsibility move by the Company.
The Company has also come with a Unique Staggered Repayment Option, only for Option III investors.
Staggered Option – (Step by Step Repay your Money)

Year
Coupon
Coupon*
% redeemed of face value
Repayment
Repayment*
1 12.65% 12.90% 5% 4413 4475
2 12.65% 12.90% 10% 5504 5564
3 12.65% 12.90% 15% 6438 6491
4 12.65% 12.90% 20% 7214 7258
5 12.65% 12.90% 25% 7831 7863
6 12.65% 12.90% 25% 7041 7056






Total 38441 38707

This could be a good option for those who are looking to pay Fees for Higher Education for their children.

NOTE :
There is an option to invest in Physical form as well as Demat form.
However, note that the Interest on investment via Demat Form will not attract any TDS while the Interest income on investment via Physical mode would be taxable

RECOMMENDATION :
The issue is rated as BBB+ by CARE. The rating is not great, but for a Real Estate company is good. The rating indicates Moderate Degree of Safety regarding timely servicing of Financial Obligations. Such instruments carry moderate credit risk.
In the recent downturn faced by Real Estate Sector, D.S.Kulkarni showed good resilience to come out unscathed.
The issue is very small and should easily get subscribed within a week of its launch.
The biggest thing going for the issue is it is SECURED and its relatively Interest Rates. The Trustee for the NCDs are GDA Trusteeship Limited who also are trustees for L&T Bonds, Shriram NCDs and hava a Asset Under Management of over Rs.1 lakh crores. The Issue is Secured with the Cover of Land placed with 1.5 times the Issue Size.
D.S.Kulkarni is the 1st Real Estate Company to come out with NCD. We have seen a deluge of NCDs from NBFCs and this certainly gives a diversification to investors who are primarily interested in Fixed Income Instruments.

Go for it, but in moderation. But do keep in mind that the NCD should only form a part of your overall Debt allocation and should not cross 5% of your Debt portfolio.




Regards,
Srikanth Matrubai



Also visit http://goodinsuranceadvisor.blogspot.in

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