Shriram Transport Finance Company NCD 2013

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It is an issue of secured, redeemable, non-convertible debentures by Shriram Transport Finance Company (STFC) to public for a total sum of Rs 500 crore. The issue is open for subscription from October 7 to October 21, but SFTC could close it earlier or extend the date.

PLANS & OPTIONS: There are six different series.

NCDs of three-year, five-year and seven-year maturities under Series I, II and III have annual interest payment option and carry effective coupon rates of 11.25 per cent per annum, 11.50 per cent per annum and 11.75 per cent per annum, respectively, for individuals.

Series IV, V and VI will be redeemable at the end of three years, five years, seven years at a premium, with effective yield rates being 11.25 per cent, 11.50 per cent and 11.75 per cent per annum, respectively, for individuals.

OBJECTIVE:

The funds raised through the NCD issue will be used for various financing activities, includments, ing lending and invest to repay existing loans and for business operations, including capital expenditure and working capital requirements.

CREDIT RATING:

The NCDs have been given AA/ stable rating by rating agency Crisil and AA+ by another rating agency CARE.

LISTING ON EXCHANGES:  The NCDs will be listed on the NSE and BSE.

MINIMUM AND MAXIMUM APPLICATION SIZE:

 Each application should be for a minimum of 10 NCDs of face value Rs 1,000, amounting to Rs 10,000, and in multiples of one NCD or Rs 1,000 thereafter. Retail individual investors can apply for NCDs aggregating to a value not more than Rs 5 lakh across all series of NCDs and those applying for more than Rs 5 lakh will come under the high net worth individuals (HNIs) category.

This is the second NCD issuance by Shriram Transport this financial year. The issuer is offering 0.6 per cent higher coupon rate, compared with its previous issue in July to retail and HNI investors, where they offered 11.15 per cent for a five-year tenure.

Coupon rates of 11.25 per cent for three year, 11.50 per cent for five year and 11.75 per cent for seven year NCDs are higher than bank fixed deposit (FD) offering 8 per cent to 9.25 per cent for three to 10-year deposits.

But the risks are higher too. The NCDs carry a higher risk of default on interest payments and principal repayments, compared to comparable investment options such as PPF and long-term bank FDs.

Also, for those looking for an early exit since the liquidity is very low, the returns could get lower.

Happy Investing!!

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