Approval of NCD private Placement.
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The Board of Directors of Salem Erode Investments Ltd approved the issuance of 5,500 Unlisted Secured Redeemable Non-Convertible Debentures (NCDs) of face value Rs. 1,000 each, aggregating to Rs. 55 Lakhs, on a private placement basis at par. The NCDs will be issued in one or more tranches with two tenure options: 36 months and 68 months. The monthly interest scheme offers a coupon rate of 12.00% per annum, payable on the first day of every month, while two cumulative schemes (36 months and doubling) have no stated coupon rate and pay out at maturity. The NCDs are unlisted and will not be listed on any stock exchange. They are fully secured against current assets, loans and advances including gold loan receivables, with a minimum 100% security cover, and Vistra ITCL (India) Limited will act as the Debenture Trustee. A put option is available on the 36-month scheme.
This is a relatively small fundraising of Rs. 55 Lakhs, indicating modest capital requirements. The high 12% coupon rate on the monthly scheme suggests the company is offering an attractive yield to attract private investors, which could raise concerns about borrowing costs for retail and existing shareholders. The security backed by gold loan receivables points to gold lending as the core business. No dilution of equity, but debt servicing obligations will increase.