Shriram Transport Finance Corporation NCD Issue

Shriram Transport NCD July 2012

This article is written by Shiv Kukreja

Shriram Transport Finance Corporation will be launching the first public issue of Non-Convertible Debentures (NCDs) this financial year from July 26th. The issue size is Rs. 600 crore including a green-shoe option of Rs. 300 crore. The company plans to use the proceeds for various financing activities including lending and investments, to repay existing loans, for capital expenditures and other working capital requirements. The issue closes on August 10, 2012.

The bonds offer an annual coupon rate of 10.25% and 10.50% for a period of 36 months and 60 months respectively. What the company has done to make these NCDs attractive for the individual investors is that they will be offered an additional 0.90% p.a. making it an annual coupon rate of 11.15% and 11.40% respectively. This means even if an individual investor buys it from the secondary markets they are going to get 11.15% or 11.40%.

Many of you must have remembered that the company came with a similar kind of issue last year also. Bonds issued last year are currently yielding 11.07% under the 60 months reserved individual option and 12.23% under the 36 months reserved individual option. So, going by these yields, 11.40% and 11.15% is actually attractive for the individual investors.

The investors will have the option to get the interest either paid annually or at the end of the tenure along with the principal. Under the cumulative interest option, retail investors will get Rs. 1,716.15 after 5 years and Rs. 1,373.19 after 3 years for every Rs. 1,000 invested. For all other investors, these amounts stand at Rs. 1,647.90 and Rs. 1,340.10 respectively.

The interest earned would be taxable but the company will not deduct any TDS on it as is the case with all of the listed NCDs. The issue keeps a minimum investment requirement of Rs. 10,000 (or 10 bonds of face value Rs. 1,000) which seems reasonable from the small retail investors’ point of view.

These bonds will offer reasonable liquidity to the investors as they are going to list on both the stock exchanges – NSE and BSE. Unlike last year, the retail investors will have the option to apply these bonds in physical form also. All the remaining investors will have to subscribe these bonds compulsorily in demat form only.

40% of the issue is reserved for the Reserved Individual Category i.e. for the individual investors investing up to Rs. 5 lakhs and another 40% of the issue is reserved for the Non-Reserved Individual Category i.e. for the individual investors investing above Rs. 5 lakhs. 10% of the issue is reserved for the institutional investors and the remaining 10% is for the non-institutional investors. NRIs and foreign nationals among others are not eligible to invest in this issue.

Shriram Transport NCD July 2012
Shriram Transport NCD July 2012

A slew of NCD issues had hit the markets last year when companies like Shriram Transport, Shriram City Union Finance, Muthoot Finance, Manappuram Finance, Religare Finvest, India Infoline Investment Services etc. came with approximately ten such issues. I must tell you, except Shriram Transport NCDs, all other NCDs listed at a discount and that too at quite a deep discount of 5-8% in some cases. Many of them have still not been able to recover from those losses. They must be yielding higher than 13% even now.

But Shriram group is a quite stable group and the issue has been rated ‘AA/Stable’ by CRISIL and ‘AA+’ by CARE suggesting that these bonds are reasonably safe to invest. Unlike last year, there are no put/call options available either to the investors or to the company.

 

105 thoughts on “Shriram Transport Finance Corporation NCD Issue”

  1. Hi,
    The 3yr option (SRTRANSFIN NR) now stands matured. Did any of you got the principal amount back? I am yet to get the check. There was no initmation from the company either.
    Let me know if any of you got this back and what was the amount per NCD.

    Anyone here know how to get the principal and unclaimed interests from the company?
    Do we need to reach out to the registrar or company ?

    Thanks,
    Madhab

  2. Hi,
    The 3yr option is now matured. Did any of you got the principal amount back? I am yet to get the check. There was no initmation from the company either.
    Let me know if any of you got this back and what was the amount per NCD.

    Anyone here know how to get the principal and unclaimed interests from the company

  3. I am really impressed with Questions and Answers in this blog.
    All the best for the good work.
    Regards
    Asif Adeni

  4. Hi Shiv,

    I got Series – 3 allotment. Later I purchased some debentures from market. The total units crossed 500. Will I be treated as individual investor? What is the impact on the interest? will it be still 11.5 p.a. Till what amount I can invest like this?

    1. Hi Ravi,
      Yes, you will be treated as an individual investor as you are not a company or an institutional investor. Also, despite becoming a high net worth individual investor (HNI) for these NCD purposes, you’ll continue to enjoy the higher rate which is applicable to the retail investors. There is no investment limit for the individual investors.

  5. I had applied for STFC ncd bonds. No bonds have been allotted to me. Can you please tell me when the money will be refunded by STFC ?

  6. If the terminal tenor of the bond is 36 months then the bond would be redeemed and paid into your bank ac for demat bonds.

    If the terminal tenor is higher but you have a put/call option 36 months then the co would mostly send u a communique in this regards, asking if you want to exercise your put option or the co would credit your payment if the co exercises call option.

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