REDEEMABLE PREFERENCE SHARES

Redeemable Preference Share is the main type of financing used by SEF, and is also known as quasi-equity.

Financing through quasi- equity lowers the gearing ratio of the company. This means that the company will have more opportunity to have access to finance.

The maximum period of shareholding of SEF in any investee company is up to 7 years.

Rs100 per share

The redemption price (repayment) is higher than the:

• Net Asset Value; or
• A Fixed price calculated on cumulative dividends of 6% per annum on initial share price as follows:

The minimum redemption price per share (pro-rated): Year 1 – Rs 106, Year 2 – Rs 112, Year 3 – Rs119, Year 4 – Rs126, Year 5 –Rs 134, Year 6 – Rs142, Year 7 – Rs151.

• The share price is capped at a maximum of 11% cumulative dividend per annum.

The maximum redemption price per share (pro-rated): Year 1 – Rs 111, Year 2 – Rs 123, Year 3 – Rs137, Year 4 – Rs152, Year 5 –Rs 169, Year 6 – Rs188, Year 7 – Rs209.

  • Companies having negative equity will not be considered when SEF is investing through redeemable preference shares in the company
  • A personal guarantee is to be provided
  • Floating/Fixed Charge to be provided by the Company
  • The redemption of Preference Shares at higher of Net Asset Value or at a cumulative dividend as from 6% p.a. capped to 11% p.a

Period of repayment is flexible and will be mutually agreed. However it should not exceed 7 years.

Flexible on guarantee. And equity exposure reduces the debt to equity ratio of the company, thus strengthening the balance sheet fundamentals.

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