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5 Reason for you to invest in Shriram Transport Finance – NCD

22 Jul

Shriram Transport Finance Company (STFC) was established in 1979 and has a long track record of over 3 decades in the commercial vehicle financing industry. This is a part of Shriram Group of Industries which has strong presence in finance sector in India.

STFC is issuing secured redeemable non convertible debentures (NCDs). The terms for investments are 3 years and 5 years and the interest rates are upto 11.5 % per annum.

Shriram Transport which is one of the biggest truck financing companies in India is issuing NCDs for 36 months & 60 months. In case of company going bust which is a distant possibility looking at the current track record of the company, you will get back your principal investment and interest.

Here are the main features of Shriram Transport NCDs:

  • The issue closes on 29th July 2013.
  • The NCDs are available for 36 months that is 3 years and 6o months, which are 5 years, so please plan for at least 3 years if you want to invest in this NCD.
  • Interest payable is annually or at maturity depending on the series.
  • Face value of the Bond is Rs. 1000
  • Minimum investment is for at least 10 bonds that is you have to shell out minimum 10000 Rupees.
  • Off course you can invest in any number of bonds depending on your capacity to invest.
  • The best part is these NCDs will be listed on NSE & BSE so no issues related to liquidity
  • NCDs are backed up with security
  • 50% of the NCDs are reserved for retail investors who can invest upto Rs. 5 lacs
  • 30% of NCDs are reserved for high net worth investors (HNI) who will have to shell out Rs 5 lacs plus for investment here.
  • 10% reserved for Institutional investors and 10 % for Non institutional investors
  • NRIs cannot invest here in this NCD.
  • The issue size is Rs. 375 crores with an option to retain Rs 375 crores aggregating to Rs 750 crores.

 Tax issues:

If the NCD is purchased through DEMAT, no TDS would be deducted by the company.

If the NCDs are purchased in physical form, TDS would be deducted if the interest exceeds Rs 5000 as per tax rules.

Income tax will be based on individual tax slabs. You need to show the income in the tax return  and pay necessary tax .

Where to apply?

You can download prospectus from www.stfc.in

Demat account holders can use their demat account to do this purchase. Check the exact location on the website of your broker.

You can also use a physical form which you can get from your local financial advisors

Ratings if you believe in it:

CRISIL Ratings are AA/Stable and CARE is AA+ which denotes high degree of safety for timely serving financial obligations and carry low risk.

Attractive interest rates of 10.09% for 3 years and 11.15% for 5 years term.

 Risks from my point is view is that investments in financial firms are little risky, if the interest payment increases , profitability may get hit so there will be margin pressure but Shriram Transport NCDs are secure and safe for high returns. Liquidity is not an issue since these are trades on stock exchanges.

I don’t think this is a risky investment at all.

IMPORTANT: Please read the prospectus of this issue before investing any amount.

 

 


Shriram Transport NCD offers interest rate up to 11.75%

Shriram Transport Finance has announced the launch of its second secured redeemable non-convertible debentures issue to raise Rs. 500 crore.

The company said the Rs. 250-crore issue, with a greenshoe option adding up to Rs. 500 crore, will open on October 7 and close on October 21. Each bond carries a face value of Rs. 1,000 each. This is the second issue in four months.

The company is offering a return of 35 bps more than its last issue at up to 11.75 per cent. The issue carries a AA/stable rating from Crisil and AA+ from Care.

Shriram Transport Finance is the largest and one of the oldest NBFCs in auto finance, primarily in the second hand commercial vehicles sale space in the country.

Close to 85 per cent of its assets worth Rs. 50,120 crore are in second-hand commercial vehicle funding, its managing director Umesh G Revanker said.

This is the sixth NCD issue by the company in past five years, he said, adding the present issue has three

tenures of, three, five and seven years. The coupon for series I, series II and series III having the tenure of 36 months, 60 months and 84 months, respectively, shall be 10.75 per cent per annum, payable annually, Revanker said.

However, on any record date retail investors shall receive an additional incentive of 0.50 per cent for series I, 0.75 per cent for series II, 1 per cent more for series III, aggregating up to 11.25, 11.50 and 11.75 per cent per annum respectively.

JM Financial and AK Capital are the lead managers to the issue, while IDBI Trusteeship Services is the debenture trustee and Integrated Enterprises the registrar to the issue.

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