Shriram City Union Finance NCD Issue

by Shiv Kukreja on September 5, 2012

in Featured, Investments

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at

Shriram City Union Finance Limited (SCUF), a part of the Shriram group of companies and the sister concern of Shriram Transport Finance will be launching the public issue of its secured non-convertible debentures (NCDs) of Rs. 500 crore including a green shoe-option of Rs. 250 crore from September 12, 2012.

The company plans to use the proceeds from the issue to finance its business operations, repay the existing loans, for lending and investment purposes and other business operations including capital expenditure and working capital requirements. The issue closes on September 26, 2012.

About Shriram City Union Finance

SCUF, incorporated in 1986, is registered with the Reserve Bank of India as a deposit-taking non-banking finance company (NBFC) with its presence in gold loans, small business finance loans, auto loans, two-wheeler loans, personal loans and consumer durable loans. The promoter group companies hold 54.95% stake in the company at present. The company has a network of 927 branches as on June 30, 2012, out of which 654 branches are located in the southern states and 85 branches are located in Maharashtra.

Financials of the company

During the year ended March 31, 2012, SCUF reported total income of Rs. 2,056 crore as against Rs. 1,323 crore during the year ended March 31, 2011, an increase of approximately 56%, mainly on account of 68% growth in the assets under management (AUM) of the company at Rs. 13,431 crore in FY12 vs. Rs. 7,998 crore in FY11.

The company reported an increase of 66% in its operating costs to Rs. 425 crore in FY12 as compared to Rs. 256 crore in FY11 while there was a jump of 42.32% in company’s profit after taxes (PAT) which stood at Rs. 343 crore in FY12 as compared to Rs. 241 crore in FY11. It reported a marginal decline in its net interest margin (NIM) from 8.21% in FY11 to 7.53% in FY12. In the first quarter of FY13, the company earned PAT of Rs. 103 crore on total income of Rs. 674 crore.

Asset quality of the company has been improving consistently over the last 2 years despite a healthy jump in its AUM. Gross NPAs and Net NPAs of the company stood at 1.55% and 0.38% respectively as on March 31, 2012 as against 1.86% and 0.43% respectively as on March 31, 2011 and 2.27% and 0.71% respectively as on March 31, 2010. This consistent decline in the NPA figures is actually quite remarkable in the current business environment and looking into the kind of customer profile the company has.

Gold loans and small business finance loans constituted 64.84% of the AUM in FY12. This figure suggest that the company is primarily focusing on these two segments to grow its business. Its portfolio is geographically concentrated as just three states, Andhra Pradesh, Tamil Nadu and Karnataka, accounted for around 89% of its portfolio as on March 31, 2012.

Features of the Issue

The company is offering an annual coupon rate of 10.60% for a period of 36 months and 10.75% for a period of 60 months to all the categories of investors except the “Resident Individual Investors” i.e. for the retail investors investing up to Rs. 5 lakhs in a single name. Like it was done in the Shriram Transport Finance NCD issue in July, the company has decided to offer an additional incentive of 0.90% per annum for 36 months and 1% per annum for 60 months to the Resident Individual Investors.

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 also. The allotment will be made on a “first-come-first-served” basis.

The NCDs have been rated ‘CRISIL AA-/Stable’ by CRISIL and ‘CARE AA’ by CARE indicating high degree of safety regarding timely servicing of financial obligations and very low credit risk. The bonds will offer reasonable liquidity to the investors as they are going to list on both the stock exchanges – NSE and BSE.

Unlike Shriram Transport Finance and IIFFL NCD issues, investors will not have the option to apply these bonds in physical form i.e. it is mandatory for all the applicants to apply for these NCDs only in the dematerialised form.

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. 1,743.30 after 5 years and Rs. 1,386.20 after 3 years for every Rs. 1,000 invested. For all other investors, these amounts stand at Rs. 1,666.65 and Rs. 1,352.90 respectively.

Investor Category Individuals Non-Individuals Individuals Non-Individuals Individuals Non-Individuals Individuals Non-Individuals
Face Value Rs. 1000 Rs. 1000 Rs. 1000 Rs. 1000 Rs. 1000 Rs. 1000 Rs. 1000 Rs. 1000
Coupon 11.50% 10.60% 11.75% 10.75% N.A. N.A. N.A. N.A.
Redemption Amount Rs. 1000 Rs. 1000 Rs. 1000 Rs. 1000 1386.20 1352.90 1743.30 1666.65
Maturity Period 36 Months 36 Months 60 Months 60 Months 36 Months 36 Months 60 Months 60 Months

As is the case with all of the listed NCDs, the interest earned will be taxable but the company will not deduct any tax at source (or TDS). The issue keeps a minimum investment requirement of Rs. 10,000 (or 10 bonds of face value Rs. 1,000) which is somewhat higher than the minimum investment requirement of Rs. 5,000 in case of IIFFL.

Performance of the bonds issued last year

NCDs issued last year by SCUF offering 12.10% coupon and 60 months to maturity are currently yielding 12.06% with the last closing price quoting at Rs. 1,043.45. NCDs offering 11.85% coupon with 36 months to maturity are currently yielding 12.78% with the last closing price at Rs. 1030. The 60 months option was subscribed by maximum number of people last year and it is also the most traded option among all the options offered. So, going by these yields, 11.75% and 11.50% should not ideally attract too many retail individual investors. At least I would not be jumping on to it for my investments.

{ 34 comments… read them below or add one }

ankurm September 6, 2012 at 4:53 PM

Interest rate sounds low, im sure muthoot will offer higher rate, given their record in recent times.


Anil September 6, 2012 at 7:35 PM

Please add this link also : to “You may also like” or Related Pages.


Manshu September 9, 2012 at 4:43 AM

Thanks for that Anil, but since this is automated I can’t add it to that section. I hope people will see your comment and will click on the page if they find it beneficial for them.


RamMohan September 10, 2012 at 2:56 PM

I agree with the final assessment that the issue is not that attractive considering that you can buy the previously issued NCDs of the same company at a better yield-to-maturity.
In fact, even Tata Capital NCDs (cumulative Series N4) are available at a YTM of close to 12%, which is definitely a better company than Shriram or Muthoot. It would be better to buy Tata Capital NCDs from the secondary market at a price of around Rs 1450 – 1460, which has a maturity value of Rs 1715 in March 2014.


Saurabh September 10, 2012 at 4:19 PM

Hi! Shiv,
In general I want to understand, regarding NCDs, that, for eg: I invest Rs.1,000/- in IIFFL for 6 years to get it double as per the scheme. So at the end of the tenure, (when everything goes well with the company) I submit the bond and in return the company pays me Rs.2.000/- (with interest, if any), is that how it ends?

And secondly, regarding Shriram City Union Finance issue, as this is compulsorily in the demat form, which means no bond certificates will be issued, so by the end of the period how will it end (retrieving the promised money)?


Shiv Kukreja September 10, 2012 at 5:21 PM

Hi Saurabh… In case of IIFFL NCDs held in physical form, NCD holder(s) will be required to surrender the physical certificate(s) to get back the maturity proceeds of Rs. 2054.50 per bond.

In case of SCUF NCDs held in demat form, no action is required on the part of NCD holder(s). The company will transfer the maturity proceeds directly into the bank account linked to the demat account and the NCDs will stand extinguished on the payment of maturity proceeds.


Saurabh September 10, 2012 at 7:51 PM

Thank you! That was helpful. 🙂


Shiv Kukreja September 10, 2012 at 9:19 PM

You are welcome Saurabh!


Saurabh October 11, 2012 at 1:40 AM

In continuation with our previous conversation (above), till now I used to prefer physical holding of NCD bond certificates, mentally getting a feel similar to having fixed deposit receipts. Basically being able to manage them with ease, for the purpose of filing and record keeping (getting a traditional sense of appeal).

So if there are options available to apply for NCDs in physical as well as demat form, then what should ideally be the preference?


Rajat September 10, 2012 at 5:11 PM

Hi Shiv / Manshu,

After I read this article and especially last para, I was keen on identifying value picks in NCD from secondary market. I could not get any such list from NSE or BSE Bhav copy.

Can you suggest me any source which can give me day-rates of available listed NCDs in BSE & NSE in retail debt segment


Shiv Kukreja September 10, 2012 at 5:30 PM

Hi Rajat… you can check some of the details about these NCDs from these links of NSE & BSE:

For NCDs listed exclusively on the BSE, you need to know their security code and search about them individually.


VikasG September 12, 2012 at 12:17 PM

Hi Shiv, Thanks for the links. I checked out the nseindia link. Looks like a good place to find the NCDs being traded. However, it would be nice if it let you sort by yields.

BTW, are there any bonds yielding 13% or higher. I looked at this – it says yield is 16.36% . Does the yield look right to you?


Shiv Kukreja September 12, 2012 at 4:23 PM

Hi VikasG… There are many unfulfilled requirements of NCD investors. I’m yet to find a platform where an investor can have all the details about these NCDs in a completely accurate form.

The yield of 16.36% is definitely incorrect, please ignore it. Yes, there are many NCDs which are trading above 13% YTM. Even this one is trading at around 14% YTM at a price of Rs. 975, if there are any sellers at this price.


Shashwat September 14, 2012 at 12:33 AM

This ncd is maturing in 2014, and yield is coming out to be little less than 13% for a person who holds it till maturity. If one assumes that after one year from now it will be trading at par value i.e 1000 then only 14% calcualtion seems possible


Rajat September 13, 2012 at 12:02 PM

Thanks Shiv, appreciate your prompt response.


Shiv Kukreja September 13, 2012 at 12:07 PM

You are most welcome Rajat!


rajeev September 11, 2012 at 12:08 PM

the liquidity in the secondary market is very low for NCDs, due to which this issue will be a massive hit among retail investors.


RamMohan September 11, 2012 at 5:07 PM

If liquidity in secondary market is limited, then there is all the more reason not to subscribe to the issue, unless of course, you are prepared to hold on to the NCD till maturity.
Since the NCD market is generally more illiquid, it makes more sense to target those NCDs which have the highest liquidity. One can easily find these NCDs in the NSE website and then buy the NCDs which have the highest liquidity. I find that apart from the tax free bonds (such as NHAI, IRFC etc), the other liquid NCDs are Tata Capital, L&T Finance and SBI.


VikasG September 12, 2012 at 12:18 PM

Thanks RamMohan


Vincent September 11, 2012 at 6:51 PM

Hello Sir,

If I understand correctly, the final yield is Rs 1743.30 against every Rs 1000 bond for 60 months thereby giving me almost 14.9% PA on maturity CAGR. Is this correct?
What if I want to redeem them earlier?


Shiv Kukreja September 12, 2012 at 11:56 AM

Hi Vincent… CAGR is 11.75% and not 14.90%. You are not considering the compounding effect with 14.90%, it is just simple interest.

You do not have the option to redeem these NCDs before maturity but you can sell them on the exchanges anytime you want.


Vincent September 12, 2012 at 12:56 PM

Thanks Shiv,
Do you this this is a value pick? Are there any risks associated?
The link Vikas posted shows Shriram City Union Finance Limited (SHRIRAMCIT-N4) at Rs 975. So Isint it good to buy it from secondary market at these rates? Although I just see 2 in volume.

ISIN : INE722A07232Coupon Rate : 11.50%Yield To Maturity: 16.36%

So whatever is the facevalue, on redemption date I am assured to get Rs 1734 after 60 months. Is it?


RamMohan September 12, 2012 at 1:22 PM

Beware. The ISIN you are referring to is an Annual interest bearing NCD with a coupon rate of 11.5% and does not have a maturity value of Rs 1734. It has a maturity value of Rs 1000, which is the Face value


Shiv Kukreja September 12, 2012 at 5:55 PM

Hi Vincent… I don’t think the current issue, offering 11.75%, is a value pick. Personally, I won’t invest in it and rather buy some already listed NCDs of better issuers.

Risks are always there with all of the issues of all of the issuers, even if they are issued by the U.S. govt. or Indian govt. An investor is required to read the prospectus to know all of the risks involved in this issue. You should have confidence in the management and the business model of a company among other thing before you invest in its shares or NCDs.

It is definitely better to buy the already listed NCDs at present. It is the high incentive game which is making most of the agents push these issues to their clients at present. Liquidity is a problem with many of these issues but you should easily get sellers if you are ready to pay them a better price.

Yes, Rs. 1743.30 is the fixed maturity value per NCD of Rs. 1000 after 60 months offered in the current issue.


Vincent September 12, 2012 at 2:01 PM

Thanks Ram.
Could you also answer my other queries pls?

Do you this this is a value pick? Are there any risks associated?
So whatever is the facevalue, on redemption date I am assured to get Rs 1734 after 60 months. Is it?

What ab Religare’s NSD?


Shiv Kukreja September 12, 2012 at 8:58 PM

SCUF issue has got 0.35 times subscribed on Day 1, including the green-shoe option. The issue has got a good response from the retail investors (Category IV) but a very poor response from the Category I and Category II investors.


Vincent September 13, 2012 at 9:46 AM

I decided to go for Religare NCD coming tomorrow. Better rates…Better Brand…diversified business.
Last years Issue has performed very well too.


dinesh September 14, 2012 at 4:33 AM

why this investment option is not for NRIs .
with some conditions they should also be allowed . otherwise what others optiona of htis kind of return.


Manshu September 14, 2012 at 5:31 AM

The Religare Finvest Issue allows NRI investment.


Shashwat October 3, 2012 at 5:25 PM

What is the listing date? There seems to be some renewed interest in listed ncds , I purchased muthoot finance 1300MFL14 and MFINNCD2A in 1030 and 1070 few days back and their prices have risen sharply.


Shiv Kukreja October 3, 2012 at 9:37 PM

Listing date is yet to be announced.


Shiv Kukreja October 10, 2012 at 12:25 PM

SCUF NCDs to list on the exchanges tomorrow – October 11th, Thursday.


madan sanghi March 12, 2013 at 11:41 AM

what is the record date for ncd of SCUF


Shiv Kukreja March 12, 2013 at 11:27 PM

Hi Madan… Record Date is March 16th and Interest Payment Date is April 1st. I think it should go ex-interest on March 14th.


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