Quarterly Returns
Rated
Exchange Listed
Filling Fast
This opportunity, called LeaseX Earth Movers, entails leasing Mining Equipment to Gainwell Commosales Private Limited (“Gainwell” or “Company”).
The quarterly lease rentals (paid in advance of every quarter by the Company) are offered in the form of a fixed-income instrument to the investors; this is enabled via a SEBI compliant instrument called Securitized Debt Instrument (“SDI”).
Flow of lease payments and investor payouts is via a Special Purpose Trust which is monitored by a SEBI-registered Trustee.
This opportunity has been rated A- by India Ratings and is listed on the National Stock Exchange (“NSE”). Access the rating rationale issued by the rating agency from the document provided below. The unique ISIN code for this instrument is INE0YD515015.
This opportunity offers attractive and regular returns, exposure to a well-capitalized, leading entity in earth moving and mining equipment space
Attractive and Regular Returns with 13.25% Pre-Tax IRR
13.25% pre-tax IRR for investors via fixed payouts.
Quarterly Payouts: Returns will be on a quarterly basis, paid in-advance. Average annual payback is 39.5% of the investment amount, resulting in faster principal payback and reduced risk.
Profitable Lessee with 3,400+ Cr in Revenue Serving Marquee Clients like L&T, DLF and Coal India
80 years of operational track record with a revenue base of INR 3,400+ Cr for 12 months ending Mar’24. The Company has been profitable consistently while closing FY24 at a net profit of INR 75 Cr (i.e. 2.20% of revenue).
Reputed client base: The Company has completed over 10,000 projects, and has served over 22,500 customers including industry leaders like ONGC, Coal India, Larsen and Toubro, Ultratech Cement, Vedanta, etc.
Marquee debt investors providing access to debt capital. Some reputable institutional lenders include HDFC Bank, Axis Bank, ICICI Bank, SBI, etc.
Grade-A Quality of Assets Manufactured by Caterpillar, Philips Being Leased
Global Best-In-Class: The plant and machinery being funded are best-in-class, durable and are designed to be used for complex engineering projects.
Long Asset Life: These assets have a life of over 15 years and the have been manufactured by renowned OEMs like Philips Global, Caterpillar Global, Ontrak Engineering and Rham Equipment.
Incorporated in 1944, Gainwell operates the dealership business for Caterpillar Inc. (“CAT”) in North and East India exclusively including Nepal and Bhutan. The Company provides construction and earthmoving equipment, mining equipment, mining services, manufacturing of mining equipment, assembling and dealership business of diesel generator sets powered by CAT and are also into renting of these equipment.
Caterpillar Inc., headquartered in Texas, USA is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. They have a presence across the globe and service/distribute their products through dealers like Gainwell. CAT reported a revenue of ~$67.1 billion in 2023.
Gainwell has a network of over 120 branches, area offices, retail outlets, workshops and rental outlets (as of Apr '24), which serve as the distribution source for the full spectrum of CAT and non-CAT products, exclusively in the northern and eastern parts of India including Nepal and Bhutan.
Apart from CAT products, Gainwell deals in the products of various other companies like FG Wilson, SEM (A Caterpillar brand), SITECH, Lintec and Linnhoff, etc.
The Company primarily has three revenue segments which are:
Revenue from the sale of goods;
Revenue from sale of services (such as maintenance and repair contracts); and
Rental income from equipment leasing
Over its 80 year journey, the Company has achieved a large scale of business and reported stable financial and operational metrics. Some key operational numbers pertaining to Gainwell are as follows:
10,000+ projects completed
22,500 customers
100+ touchpoints
2,000+ employees
28,000 active machine population
The Company has a reputed clientele base across various business verticals. A brief summary of the same is given below:
Gainwell has a state of the art manufacturing facilities at Greater Noida (Unnati), Asansol (Pragati), Udaipur and Kathmandu which cater to mechanical engineering demands of fabrication, engineering, rebuilding, re-commissioning, overhauling, repairs and maintenance of heavy engineering equipments in construction and mining sector, generator sets and their assemblies of various wattages and other related machines and engines. These facilities encompass an area of over 700,000 sq. ft. and have been operational for over 2 decades.
[Sunil Chaturvedi](https://www.linkedin.com/in/sunil-chaturvedi-0a254219/) \- In 2014, he was appointed as Chairman & Managing Director of Gainwell. He started his career in the year 1985 as an Associate Chartered Accountant followed by a long tenure of 20 years as an Indian Administrative Service (IAS) officer. He also served as a Director and COO for Bharat Forge Limited.
[Meena Chaturvedi](https://www.linkedin.com/in/meena-chaturvedi-62321361/) - Joined the Board of Directors of Gainwell in 2016 as the Joint Managing Director, overseeing Human Capital Management, Internal Audit and Projects. She is responsible for working capital management and general superintendence of finance & accounts and marketing functions and also chairs the CSR committee of the board. She started her career as a member of the Indian Civil Services in the year 1987 and holds a Master’s degree in Economics from Delhi School of Economics, Delhi University and an M.Phil. from Indian Institute of Public Administration, New Delhi.
Financial Year 2024 (FY24)
The Company reported revenue of INR 3,415 Cr. for the period FY24. The revenue has increased by approx. 25% as compared to FY23. This was largely driven by the increase in orders from existing customers and the average order value.
The EBITDA margins of the Company were 9% in FY24 as compared to 11.4% in FY23
Outstanding debt balance (including fund-based and non-fund based) was approx INR 500 Cr as of Mar’24. The key lenders to the Company are Axis Bank, State Bank of India, HDFC Bank, Punjab National Bank and ICICI Bank. The Debt/Equity of the Company was 1.50x as of Mar’24.
Financial Year 2023 (FY23)
The Company’s revenue grew by 9% to INR 2,737 Cr in FY23 from a revenue of INR 2,539 Cr. in FY22.
EBITDA margin of the Company increased to 11.4% in FY23 as compared to 10.4% in FY22. The PAT margins remained stable and range bound at around 2.7%
The end user is Eastern Coalfields Limited (A subsidiary of Coal India Limited). The assets are deployed at Kumardih underground mines of the Bankola area of Eastern Coalfields in West Bengal.
The assets include plant and machinery namely:
_Shuttle Car of Philips Global INC_ \- Shuttle cars receive coal from a continuous miner and transport it to a loading point which is typically the ‘boot end’ of the mine belt conveyor system, before returning to the continuous miner.
_Roof Bolter of Rham Equipment_ \- Through roof bolters, roof support bolts are installed on the roofs of the underground mines to prevent mine cave-ins.
_Feeder Breaker of Ontrak Engineering_ \- Feeder breaker is used as an initial processor of mining material. The breaker keeps production of mining materials flowing smoothly with the use of conveyor belt technology.
_MUV of Caterpillar Global_ \- Used for multiple purposes like general mine transportation, digging and rapid transport of roof supports.
Image of Roof Bolter
Image of Shuttle Car
Is IRR different from ROI?
ROI and IRR are complementary metrics where the main difference between the two is the time value of money. ROI gives you the total return of an investment but doesn’t take into consideration the time value of money. For example, INR 1,000 received today is more valuable than INR 1,000 received after 3 months. IRR calculations take into consideration when the INR 1,000 was received, while ROI does not.
IRR hence not only represents the amount of money earned but also how fast it was earned.
What is a LeaseX?
LeaseX is a lease backed investment opportunity structured in the form of a Securitized Debt Instrument (“SDI”) which is a tradable fixed-income instrument issued in accordance with a SEBI framework. Grip, through LeaseX, offers lease rentals backed SDIs which are rated by a credit rating agency and are listed on National Stock Exchange (“NSE”) or/and Bombay Stock Exchange (“BSE”) in a demat form. It provides investors with fixed periodic payouts linked to rental payments made by a single or a diverse pool or leasing partners. For risk mitigation, all cash flows are managed by a SEBI registered trust (who has set up a separate bank account controlled by the trustee to receive future rentals and ring-fence the receivables).
Is the LeaseX tradable?
LeaseX is in the form of SDI and therefore is a tradable instrument held in dematerialised form, i.e., it offers a similar experience to buying, holding, and selling a bond. However, ability to find a buyer is not guaranteed by Grip and the investor could expect to hold the instruments until maturity.
What is the history of the SDI?
SDI was introduced by SEBI in 2008 under the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations. The first asset leasing backed SDI was listed on the National Stock Exchange (NSE) by Grip on 7 October 2022.
How is LeaseX secured?
The LeaseX (in SDI format) is a SEBI compliant, listed, and rated instrument managed by an independent, SEBI-registered trustee. The monthly/quarterly returns in the LeaseX originate from contracted lease agreements with the lessee(s). Lessee(s) forming part of any SDI are decided upfront and cannot be changed during the tenure.
What is the tax applicable on my returns?
Only the monthly/quarterly interest payout is expected to be taxed at the marginal tax rate of the individual investor (subject to any withholding tax/ TDS deductions); no tax should be payable on the principal repayment. Appreciation (if any) of the price of the SDI, in case of sale prior to the full tenure, is expected to be considered as capital gain and taxed accordingly. Please do not consider this as tax advice. We urge you to speak with your independent tax advisor.
What is accrued interest?
Accrued interest is the amount of interest due on the SDI that has accumulated since the last time an interest payment was made. The interest has been earned by the existing holder, but because interest is only paid at set intervals, the investor has not received the money yet. If the present holder sells his SDI, he should be entitled to get the interest until the date of the sale.
For example, assume you receive INR 1,000 as interest on the 30th of every month. On the 15th of the month, you decide to sell the SDI. Since you held the SDI for 15 days, an equivalent coupon amount, in this case INR 500 is earned by you but not yet received. Hence, when you sell the SDI, the INR 500 in accrued interest must be added to the sale price to fairly compensate you.
What is the difference between the clean price and dirty price of the SDI? (Purchase Price vs Investment Amount)
The clean price is the price of an SDI not including any accrued interest. The clean price is typically calculated as the adjusted face value of the instrument closer to the nearest payout date, ceteris paribus. Dirty price is the price of an SDI that includes accrued interest between payout dates.
How is the Investment amount of an SDI calculated?
The investment amount is the sum of the face value of each SDI (“Clean Price”) and accrued interest and premium (if any).
Can the SDI’s clean price fluctuate?
Yes, similar to bonds, there could be 2 major factors due to which the prices fluctuate:
Interest rates: Price of fixed income instruments is inversely related to the prevailing interest rates. With an increase in interest rates, the buyer expects more returns and accordingly the price of the instruments goes down.
Credit risk: SDIs are rated by independent credit rating agencies such as CRISIL, ICRA, etc. who rank the risk for default. If a credit rating agency lowers or raises a particular SDI’s rating to reflect a change in risk, the returns may increase or decrease respectively to compensate the buyer.
For example, the typical symbols and related expectations are discussed below:
AAA - Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of debt obligations. Debt exposures to such issuers carry lowest credit risk.
AA - Instruments with this rating are considered to have a high degree of safety regarding timely servicing of debt obligations. Debt exposures to such Instruments carry very low credit risk.
A - Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of debt obligations. Debt exposures to such Instruments carry low credit risk.
BBB - Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of debt obligations. Debt exposures to such Instruments carry moderate credit risk.
BB - Instruments with this rating are considered to have moderate risk of default regarding timely servicing of debt obligations.
B - Instruments with this rating are considered to have high risk of default regarding timely servicing of debt obligations.
C - Instruments with this rating are considered to have very high risk of default regarding timely servicing of debt obligations.
D - Instruments with this rating are in default or are expected to be in default soon.
Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories AA to C. The modifiers reflect the comparative standing within the category.
What are the different types of payment structures in SDI transactions?
Timely Interest and Timely Principal (TITP): Under this structure, both interest and principal payouts are promised at specified intervals (monthly/quarterly, etc.). If there is any shortfall in the promised payouts, credit enhancement available in the transaction can be utilized.
Ultimate Interest and Ultimate Principal (UIUP): Under this structure, there is a distinction between promised payouts, and expected payouts. While the interest and/or principal payouts could be expected at specified intervals, they are promised only on the maturity date. This implies that credit enhancement can be utilized only if the principal and/or interest is not fully paid out on/before the maturity date of the transaction.
Timely Interest and Ultimate Principal (TIUP): Under this structure, while the interest payouts are promised at specified intervals, the principal payouts are only expected at specified intervals. This implies that credit enhancement can be utilized if there is any shortfall in promised interest payouts, and also if the principal is not fully paid out on/before the maturity date of the transaction.
Can I withdraw my funds before the maturity period of the transaction?
LeaseX (in SDIs format) are tradable instruments. This means that there is no lock-in on your investment. If you want to sell the instrument before maturity, you can do so in the secondary market at the market price (market price may vary from par-value).
Is it compulsory to do KYC for LeaseX investment?
Yes, SEBI has mandated KYC requirements for the purchase of the SDIs to prevent money laundering activities.
Is it okay if I transfer the funds from someone else’s account?
No. It is mandated under applicable laws for funds to be transferred from the bank account in the name of the investor.
What is Hypothecation and Insurance Cover?
Hypothecation means a charge on the movable property which is created by the borrower in the favour of the creditor as a security to get financial assistance from the creditor.
Depending upon the category of assets and commercial reasonableness, the leased assets may or may not be insured. In case insurance is available, upon the occurrence of a likely event of any loss to the assets, the owner of the assets will receive reimbursement for the loss from the insurer. This remains subject to the terms of the insurance policy.
When would my returns start?
Your lease returns will start within 30 to 45 days of completion of 100% funding for an asset
In case, it takes us more than 7 days to complete 100% funding for the asset, your investment will additionally earn interest till the complete funding target is achieved. This additional interest will be paid out along with your first monthly return and be calculated at the fixed deposit rate for a 30 day FD from HDFC Bank
Is IRR different from ROI?
ROI and IRR are complementary metrics where the main difference between the two is the time value of money. ROI gives you the total return of an investment but doesn’t take into consideration the time value of money. For example, INR1,000 received today is more valuable than INR1,000 received after 3 months. IRR calculations take into consideration when the INR1,000 was received, while ROI does not.
IRR hence not only represents the amount of money earned but also how fast it was earned
What is the difference between pre-tax and post-tax returns?
For each transaction a Limited Liability Partnership, LLP is set up for the purchase and lease of the assets
Pre-tax returns are based on the lease income received by the LLP from partners. The LLP is liable to pay tax based on applicable accounting standards on this lease income. The post-tax returns are calculated after deducting such taxes as well as the management fees charged by Grip. Since there is no further tax on either the LLP or you on the distribution of these post-tax returns, these are the net returns received by you. You will have no further tax obligation or payments due to Grip from these returns.
What are the tax implications on my post-tax returns?
All payments that you receive are made post-tax and hence, there are no additional tax implications for you
Under the accounting standards applicable for LLPs, certain expenses such as depreciation reduce the effective tax rate and these benefits are already factored into your returns
How does my ITR filing process change?
As a partner to the LLP, you will need to additionally fill ITR form 3 when you submit your income tax returns
On behalf of the LLP, we will file ITR 5 and provide the same to you to make the process transparent and easy for you
Is there any repayment security and is there a contingency plan in case of non-payment by partners?
We have the ability to reclaim assets for selling or re-leasing. However, you must note that while we have these safeguards in place, it does not guarantee 100% returns in case the leasing partner defaults. In that case, Grip will take the suitable legal course
Who recovers assets in case of default?
Grip will take care of all the processes related to the reclaim of assets for selling or re-leasing
What is the process of investment?
Once the funding target is achieved, we would send you the agreement and consent letter for the LLP which would be the vehicle of investment for the deal
Parallelly, the LLP signs the agreement with the leasing partner so that the payment dates get locked
You start receiving returns within 30 days after the 100% funding is completed
All information provided in this document is based on publicly available information and disclosures made by the management of the lessees.
Such investment does not guarantee that an investor will make money, not lose money, or indicate that the investment is risk-free.
The payment structure in this transaction is UIUP (i.e. ultimate interest and ultimate principal).
* Information provided in this document does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. **Grip Broking Private Limited is a SEBI-registered Stock Broker***(INZ000312836) and is also a trading member registered with both NSE and BSE**. However, Grip Invest Technologies Private Limited is not registered with **SEBI or RBI** in any capacity and does not advise, encourage, or discourage its users to invest or not invest in any securities. We are solely an execution-only platform and do not guarantee or assure any return on investments made by investors in any opportunities sourced by us. We accept no liability for consequences of any actions taken based on the information provided. Any investment made by an investor is solely based on his/her judgement. Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/or default in payment. Read all the offer related documents carefully.Default Risk: There could be possible termination due to default by the obligors in payment under the rental agreements. The lease rentals under the rental agreements are not guaranteed by the obligors. Further, the underlying assets are hypothecated to the Trust and the investors will have recourse to the underlying leased assets in case of default by the obligors in payment under the rental agreements. However, the investors bear the risk of any delays, repossession/ liquidation of assets, or failure from enforcement of such rights in a court of law.
Prepayment Risk: In the event of a Prepayment, the receivables due from the obligor will be discounted at a rate as agreed between the originator and the lessor and will be paid to the Investors at the promised expected yield.
Limited recourse, delinquency and credit risk: The Deed of Hypothecation stipulated represents a limited recourse to the Originator. The SDIs represent an undivided beneficial interest in the assets and do not represent an obligation of either the Trust or the Originator. No financial recourse is available to the investors against the Trust or the Originator. Any delinquencies and credit losses may cause depletion of the amount available for the periodically expected pay-outs to the holders of the SDIs.
Further, although the SDIs represent an undivided beneficial interest in the assets the instrument carries a loss of principal risk as there are chances that an investor may not get back the money he or she has invested or may lose the value or at least a portion of the original investment made.
Bankruptcy of the Originator / Servicer: If the Originator becomes subject to bankruptcy proceedings and the court or tribunal in the bankruptcy proceedings concludes that the sale of receivables from Originator to the Trust was not a valid and absolute sale, then an Investor could experience losses or delays in the payments. All possible care has been taken in structuring the transaction so as to minimise the risk of the sale to the Trust not being construed as confirming to the ‘True Sale’ criteria. The legal counsel to the Trust has agreed to opine that the assignment of Receivables to Trust in trust for and for the benefit of the Beneficiaries, as envisaged herein, would constitute an absolute and valid sale.
Rating of the SDIs: The rating is not a recommendation to purchase, hold or sell the Receivables in as much as the credit opinion does not comment on the market price of the SDIs or its suitability to a particular Investor. There is no assurance either that the rating will remain at the same level for any given period of time or that the rating will not be lowered or withdrawn entirely by the Rating Agency. In the event of deterioration in the financial health of the Obligor, there is a possibility that the Rating Agency may downgrade the rating given to the transaction. In such cases, an investor may have to take loss on revaluation of their assets or make provision towards sub-standard/ non-performing assets as per their usual norms.
Limited Liquidity and Price Risk: There is no assurance that a deep secondary market will develop for these instruments. This could limit the ability of the Investor to resell them on the exchange. Even if a secondary market develops and sales were to take place, these secondary transactions may be at a discount to the initial issue price due to changes in the interest rate structure.
Material changes in regulations to which the obligor is subject could impair the obligor’s ability to meet payments or other obligations: The Obligor is subject generally to changes in Indian law, as well as to changes in government regulations and policies and accounting principles. Any changes in the regulatory framework could adversely affect the profitability of the Obligor or its future financial performance, by requiring a restructuring of its activities, increasing costs or otherwise.
Servicer Agreement: The Originator shall act as Servicer for the assigned contracts and continue to monitor the pool and shall ensure timely collections of the Receivables from the Obligor in the Collection and Pay-Out Account. The Originator has limited prior experience in acting as the servicer. In the unlikely event that the Servicer is unable to perform its functions as a ‘Servicer’ satisfactorily, the appointment of the existing servicer may be terminated under the circumstances set out in the Servicer Agreement. In such an eventuality, the Trustee is required to appoint as an alternate servicer or to function as the back-up servicer in accordance with the SEBI SDI Regulation. The cost of servicing in that case may be recovered from the Receivables, which may cause a shortfall in the monthly Pay-Outs to PTC holders.
Risks due to possible termination of underlying documents: There could be termination of the Underlying Documents. In the event of the termination of the Underlying Documents:
The possession of the Underlying Assets, subject to normal wear and tear, will be immediately handed over to the Originator, on the date of termination of the relevant Underlying Document;
The Investors are subject to the risk of changes in the average tenor of the SDIs on account of termination of Underlying Documents.
Tax Risks: The Investor’s Pay-outs may be reduced on account of tax levies on the income distributed by the Issuer to the Investors, depending on the status/category of the Investor, which may result in a reduction in the respective Investor’s net securitisation income, if any.
For opportunities where an information memorandum/ offer document is filed with any regulatory authority, a copy of such document will be made available to you. Your attention is invited to the statement of risk factors contained under “Risk Factors”/ “Material Developments” (see Chapter 8 of the Information Memorandum), in addition to those listed above. Please note that the risks mentioned above are not, and are not intended to be, a complete list of all risks and considerations relevant to any products/ opportunities being made available to you, or your decision to invest in such products/ opportunities.
Related Party Disclosure: The seller of this security is a related party of Grip Broking Private Limited (GBPL) and GBPL charges brokerage fees from this entity (based on the investment amount). Grip or its related parties might also earn an income on procuring or originating such securities/ transactions.
Issuer Name: Prosperity Asset 8
Security Name: Prosperity Asset 8
ISIN: INE0YD515015
Nature of Instrument: Listed
Seniority: Senior Tranche
Original Mode of Issue: Private Placement
Date of Issue: 30 August 2024
Rating of the Instrument: ‘A-’ by India Ratings, dated September 3, 2024
Face Value: INR 1,01,600 per PTC
Clean Price and Dirty Price: Based on the calculator above
Date of Maturity/ Tenor: November 5, 2027/36 months
Name of Debenture Trustee: MITCON Credentia Trusteeship Services Limited
Offer Documents: [Information memorandum\_Gainwell.pdf](https://drive.google.com/file/d/1_zsB7X3GZgR9cs7-g7yrXAIm-YxxFUvs/view?usp=drive_link)
Transaction Structure: Ultimate Interest and Ultimate Principal (UIUP)
All information provided in this document is based on publicly available information and disclosures made by the management of Drink Prime and Everest Fleet
There is an active secondary market for Maruti S-Presso cars. Based on numbers of kilometers of user, year of manufacture and condition of the vehicle, the secondary price for a Maruti S-Presso may range from INR 2.0-3.5 lakhs
Such investment does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free
Total security deposit paid by the leasing partners will equal to 7% of the asset value
The cars provided to Everest Fleet will be hypothecated to the SPV created for the investment. Grip will take physical possession of the assets in case of termination of the lease
Complete compensation in case of loss of the assets will be the responsibility of the lessee. Further, they will also be responsible for all repairs (whether routine or resulting from any damage or accident and maintenance costs of the respective assets)
Water Purifiers with Drink Prime (50%)
This investment opportunity involves leasing out water purifiers to Drink Prime
Depreciation on the assets being leased is 15%
CNG Maruti S-Presso with Everest Fleet (50%)
The asset being leased is Maruti S-Presso Cars (CNG variant). The on-road cost of the car including insurance will be INR 5,32,312
Depreciation on the asset being leased is 30%
What does this mean for you?
If you would like to exit your investment made on Grip before the full lease tenure of 36 months, you can now choose to do so anytime after 24 months
How does this work?
Anytime after 24 months from the investment date (lock-in period), you can email your request for "Liquidity" by writing to [liquidity@gripinvest.in](mailto:liquidity@gripinvest.in)
One can view the working [here](https://docs.google.com/spreadsheets/d/1jiTVDv-CEuPhQyqij9y9Ebv_ugw02A4S5rJU4zFAaLg/edit#gid=183572711)
Within 7 working days of your email, you will receive a credit of the final compensation amount in your bank account
Grip has kept a cash reserve of 10% of this asset value and will be using the same to compensate the first 10% of the investors (by value) exercising the offer after the lock-in period
We will be offering this option on a deal basis