Shriram Transport NCD Review

After the success of Tata Capital NCD, here comes another issue from a Non Banking Finance Company (NBFC) Shriram Transport Finance. It has plans to raise about Rs.500 crores and additional 500 crores through debenture issue. The issue opens on July 27 and will close on August 14.

The face value and the issue price is Rs.1000 and the minimum application is for 10 debentures Rs.10,000. There are two options 36 months and 6o months.
1. 36 months - coupon rate 10.75% paid annually, redemption after 36 months.
2. 60 months - coupon rate 11% half-yearly/ 11.25% annually, redemption in the ratio of 40%, 40% an d20 % at the end of 36/48/60 months.

Also there is a 0.25% p.a additional interest for Senior Citizens. No Income tax is deductible at source on interest. CARE has given AA+ rating to the issue, while Fitch has given it AA (ind) rating.

The term deposit rates are in the range of 6-8% for deposits of more than one-year maturity. There is a premium of more than 3% in the company’s NCD offer and there is not much risk in this 30 year old company. Investors can invest in these NCDs and lock-in some higher returns.