Introduction
Shriram Transport Finance, India’s largest commercial vehicle financing company, is incoming to the debt capital market with a public issue of secured Non-Convertible debentures (NCD) of face value Rs. 1,000 each, on October 07th 2013, to increase of Rs. 250 crore, with an opportunity to keep another Rs. 250 crore, captivating the entire fund raised to Rs. 500 crore.
Issue Allocation
- 50% reserved for retail investors,
- 30% for HNIs
- 10% each for institutions and non-institutions
Issue Details
21st October 2013 (with option to close / extend the issue)
Details
National Stock Exchange and Bombay Stock Exchange, one Non Convertible Debentures comprising one trading lot.
Application Amount
Lowest Rs. 10,000/- and in multiples of Rs. 1,000/- afterward
Rating
‘AA/Stable’ by CRISIL, ‘AA+’ by CARE, signifying high degree of security for timely interest and principal payment.
Company Background
Shriram Transport Finance, a deposit taking, Non Banking Financial Company with Assets Under Management of Rs. 52,717 crore as of March 31, 2013, is the only organized player in the used Curriculum Vita financing market, joined with a healthy balance sheet with capital adequacy ratio (CAR) of 20.58 percent as of March 31st 2013, against RBI’s requirement of 15 percent. Company’s total income for FY13 was Rs. 7,014 crore (up 13% YoY), with net profit of Rs. 1,463 crore (up 12% YoY). Its net Non Performing Assets are just 0.8% of net loan assets in FY13, on net worth of Rs. 7,338 crore. The funds raised via the Non Convertible Debentures issue will be used for financing behavior, repaying accessible loans, business operations and working capital condition. Therefore, the company is fundamentally hummed with a strong balance sheet.
Proffer of the issue
Three different tenures are being offers Three years, Five years and Seven years:
|
Particulars |
Series I |
Series II |
Series III |
Series IV |
Series V |
Series VI |
|
Term |
3 Years |
5 Years |
7 Years |
3 Years |
5 Years |
7 Years |
|
Interest Payment |
Annual |
Annual |
Annual |
NA |
NA |
NA |
|
Coupon Rate {% P.A} |
||||||
|
# Individual Investor |
11.25% |
11.50% |
11.75% |
NA |
NA |
NA |
|
# Non-Individual Investor |
10.75% |
10.75% |
10.75% |
NA |
NA |
NA |
|
Effective Yield{% P.A} |
||||||
|
# Individual Investor |
11.25% |
11.50% |
11.75% |
11.25% |
11.50% |
11.75% |
|
# Non-Individual Investor |
10.75% |
10.75% |
10.75% |
10.75% |
10.75% |
10.75% |
|
Put Call Option |
None |
None |
None |
None |
None |
None |
|
Redemption Amount {As Per NCD} |
||||||
|
# Individual Investor |
Face Value +Accrued Interest |
Face Value +Accrued Interest |
Face Value +Accrued Interest |
Rs. 1,377.30 |
Rs. 1,723.87 |
Rs. 2,177.70 |
|
# Non-Individual Investor |
Rs. 1,358.79 |
Rs. 1,666.63 |
Rs. 2,044.79 |
|||
Rate of Return
The highest rate of interest / effective yield is being offered to individual investors under Series III and Series VI option for 7 years i.e.11.75% per annum.
Non Convertible Debentures offer dual advantage of higher coupon rates and liquidity (individual listed), making it a good-looking investment option for retail investors, vis-à-vis bank Fixed Deposit. On a post-tax basis, Series III and VI’s 11.75% yield offers net return of 8.12% pa to those falling in the highest tax group. Lying on the other hand, IIFCL tax free bonds (currently open for subscription) are offering 8.75 percent tax free return for twenty years, which score over the Non Convertible Debentures hands-down due to higher coupon and longer term.
Recommendation
Present Non Convertible Debentures issue from the Shriram group is an attractive fixed income gadget for each, but in comparison with tax free bonds, one must choose the last.
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