Srei, a public finance institution | srei

Srei, a public finance institution

Srei, a Public Finance Institution (PFI) contributes to infrastructure growth

The Ministry of Corporate Affairs, through its notification dated September 26, 2011, published in the Official Gazette of India notified Srei, as a Public Financial Institution under Section 4A of the Act. As a result of the PFI status, Srei is required to undertake certain continuing compliances such as the main business of our Company should be industrial / infrastructural financing, the financial statement should show that its income from industrial/ infrastructural financing exceeds 50% of its income; and the net-worth of our Company should be at least Rs. 10,000 million.

Being a PFI, Srei benefits from section 36(1) (vii c) of the Income Tax Act, which permits a PFI to include doubtful debts as an eligible deduction under the Income Tax Act. Consequently, the operations of Srei are subject to relatively low tax liabilities.

Criteria for obtaining PFI status

The Ministry of Corporate Affairs (MCA) issued ‘PFI Guidelines’ on June 2, 2011, for granting the Public Finance Institution (PFI) status to a financial institution under Section 4A of the Companies Act.

A financial institution has to comply with the following requirements to obtain a PFI status:-

  • A company or corporation should be established under a special act or the Companies Act, being Central Act;
  • The main business of the company should be industrial/infrastructural financing;
  • The company must be in existence for at least three years and its financial statement should show that its income from industrial/ infrastructural financing exceeds 50% of its income;
  • The net-worth of the company should be Rs. 10,000 million;
  • The company should be registered as an Infrastructure Finance Company (IFC) with the RBI or as a Housing Finance Company (HFC) with the National Housing Bank;

Srei NCDs : Opportunity for your organization

With the new regulation (EPF Scheme, 1952, as amended by notification dated September 10, 2008 ) PF trusts, Superannuation and Gratuity Funds can now invest up to 40% of their investment corpus in NCDs / securities of a PFI. Srei being a PFI, can cater to the investment requirements of your organization.

Your organization can choose any of the investment routes:

Public Issue: In this method the NCDs are sold to the public at large in the primary market. Bids are collected from investors and the NCDs are listed in the stock exchanges. The NCDs are offered through a window of fixed duration as an Initial Public Offer (IPO).

Private Placement: In this process NCDs are offered to a small set of clients through a clutch of distributors, usually through word-of-mouth publicity as regulations donot permit companies to advertise or market these bonds.