About Company:
Incorporated in 1979, Shriram Transport Finance Company Limited {STFC} is engaged in the business of commercial vehicle finance, Consumer finance , Life and General Insurance, Stock Broking, chit funds and distribution of financial products like life & general insurance harvest and element of mutual funds. Shriram Transport having 528 branches and service centers throughout India. The Company providing asset financing NBFCs with Reserve Bank of India under section 45IA of the Reserve Bank of India Act ,1934.
Objects of the Issue:
- Various financing activities including lending and investments,
- To repay existing loans and for business operations including capital expenditure and working capital requirements.
Issue Details:
- Issue Open: 16 July’2013 – 29 July’2013 {with option to close/extend the issue}
- Issue Type: Fixed Price Issue NCD
- Issue Allocation: 50 Percent reserved for Retail Investors, 30 percent for HNI and 10 percent Each for Institutions and Non-Institutions
- Issue Size: Rs. 750.00 Crore
- Application Amount: Minimum 10,000 and in multiples of 1,000 thereafter
- Listing At: BSE, NSE NCD comprising one trading lot
The NCDs proposed to be issued have been rated ‘CRISIL AA/Stable’ by CRISIL and ‘CARE AA+’ by CARE, indicating high degree of safety for timely interest and principal payment.
Options:
| Particulars | Series I | Series II | Series III | Series IV | Series V |
| Interest Pay Out | Annual | Annual | Monthly | On Redemption | On Redemption |
| Tenure | 3 Years | 5 Years {4+1} | 5 Years | 3 Years | 5 Years {4+1} |
| Coupon Rate {% P.A} | |||||
| Individual Investors | 10.90% | 11.15% | 10.63% | N.A | N.A |
| Non-Individual Investors | 9.65% | 9.80% | 9.40% | N.A | N.A |
| Effective Yield {% P.A}} | |||||
| Individual Investor | 10.90% | 11.15% | 10.63% | 10.90% | 11.15% |
| Non-Individual Investor | 9.65% | 9.80% | 9.40% | 9.65% | 9.80% |
| Put/Call Option | Non | None | None | None | None |
| Redemption Amount {Per NCD} | |||||
| Individual Investor |
Face Value + Accrued Interest |
50% face value after 4 years, 50% face value after 5 years with accrued interest |
Face Value + Accrued Interest |
Rs. 1,364.33 |
Rs. 763.37 after 4 years, Rs. 848.48 after 5 Years |
| Non-Individual Investor |
Rs. 1,318.67 |
Rs. 726.93 after 4 years, Rs. 798.17 after 5 years |
The highest rate of interest is being offered to individual investors under the 4+1 year’s tenure {i.e.} Series II and Series V, at 11.15 percent per annum effective yield. Series III with 5 year tenure is offering the lowest yield of 10.63 percent.
Shriram Transport Finance, a deposit-taking NBFC with assets under management (AUM) of Rs. 52,717 crore as of March 31, 2013, is the only organized player in the pre-owned CV financing market, coupled with a healthy balance sheet with capital adequacy ratio (CAR) of 20.58 percent as of 31st March 2013, against RBI’s requirement of 15 percent. Shriram Transport Finance total income for FY13 was Rs. 7,014 crore (up 13% YoY), with net profit of Rs. 1,463 crore (up 12% YoY). Shriram Transport Finance net NPAs are just 0.8% of net loan assets in FY13, on networth of Rs. 7,338 crore. The funds raised via the NCD issue will be used for financing activities, repaying existing loans, business operations and working capital requirement. Consequently, Shriram Transport Finance is fundamentally sound with a strong balance sheet.
NCDs offer dual advantage of higher coupon rates and liquidity, as they are listed on the stock exchanges, making it an attractive investment option for retail investors, vis-à-vis other fixed income products, such as bank Fixed Deposit or debt schemes of mutual funds. Also, 11.15 percent interest rate is attractive in the current macro environment. Even on a post-tax basis, Series II and V offer net return of 7.70 percent per annum to those falling in the highest tax bracket.
Even though listed, NCDs being very thinly traded on the stock exchange, a comparison of yields with peers or previous issues would be inappropriate. Take for example, the NCDs issued in July 2012 at coupon of 10.25 percent and 10.50 percent are trading at yields of 9.40-9.50 percent. Furthermore, there are few company deposits offering yields of 15.07% for 3 years (e.g. IVRCL). Yet, risk-reward pay-off is not favorable.
Present NCD issue from the Shriram group is very attractive for retail investors as it offers high ‘fixed returns’ for a long-term duration of 5 years. The group is perceived to be very investor friendly and has a history of successful NCD issues in the past. Those looking for diversified investment options can apply in the issue (Series II or Series V), which scores over other ‘fixed income’ investment options. Click here to know more about Shriram Transport Finance Company NCD.
Shriram Transport NCD Lead Manager(s):
- JM Financial Institutional Securities Private Ltd.
- AK Capital Services Limited
- HDFC Bank Limited
- ICICI Securities Limited
Shriram Transport NCD Co-Lead Manager(s):
- Karvy Investor Services Limited,
- RR Investors Capital Services Private Ltd.
Shriram Transport NCD Trustee(s):
- SMC Capitals Ltd and Trust Investment Advisors Private Limited
- IDBI Trusteeship Services Ltd.
Shriram Transport NCD Registrar:
- Integrated Enterprises (India) Ltd.