Shriram
Transport Finance Company Limited NCD issue
Today Shriram
Transport Finance Company Limited (STFCL) have launched its public issue of non-convertible debentures
(NCDs). The current issue will get closed in a couple of weeks time on October
21st, if it does not get preclosed this time again or extended by the company
beyond this date. The company plans to raise Rs. 500 crore with this issue,
including a green-shoe option of Rs. 250 crore.
This is the second such public issue of this financial year from STFC, as
the company raised Rs. 750 crore from its first issue in July and
the issue had got preclosed in just seven days time on July 24th.
Shriram Transport Finance offered 10.90% per annum for 36 months and
11.15% per annum for 60 months in its last issue to the individual investors.
This time the rates are 35 basis points (or 0.35%) higher at 11.25% per annum
for 36 months and 11.50% per annum for 60 months. The company did not offer 84
months option in its first issue. There is no monthly interest option this
time.
Here you have the table having the details about the tenors and the interest
rate options with
cumulative and non cumulative option.
As you can check
from the table above, there is an additional incentive of 0.50% p.a. with 36
months option, 0.75% p.a. with 60 months option and 1% p.a. with 84 months
option. Unlike tax-free bonds, this additional incentive is available to the
individual investors irrespective of the size of their investment amount.
Categories of Investors
- The
investors have been classified in the following four categories and the
individual investors fall in Category III as well as Category IV.
§ Category I – Institutional Investors
§ Category II – Non-Institutional Investors
§ Category III – High Net-Worth Individuals, including Hindu Undivided Families
(HUFs)
§ Category IV – Retail Individual Investors, including Hindu Undivided Families (HUFs)
Non-Resident
Indians (NRIs), foreign nationals and qualified foreign
investors (QFIs)
among others are not eligible to invest in this issue.
Allocation
Ratio - 50%
of the issue is reserved for the Retail Individual Investors. The individual
investor can invest up to Rs. 5 lakh and
30% of the issue is reserved for the High Net-Worth Individual Investors. 10%
of the issue is reserved for the Institutional Investors and the remaining 10%
is for the Non-Institutional Investors (NIIs). The allotment will be made on a
“first come first serve” basis.
Minimum
Investment - The
company has decided to keep the minimum investment requirement is Rs. 10,000 again The face value of bond is Rs. 1,000 each.
Listing - STFC will get these bonds listed on the National Stock Exchange (NSE) as
well as the Bombay Stock Exchange (BSE). Investors can apply for these bonds
either in physical form or in demat form. The company will get the NCDs
allotted and listed within 9 working days from the date of closure of the
issue.
Rating
& Nature of the NCDs - CRISIL
has rated these NCDs as ‘AA/Stable’ and CARE has assigned a rating of ‘AA+’ to
this issue. Moreover, these NCDs are ‘Secured’ by a first charge on an
identified immovable property and specified future receivables of the company.
Taxability & TDS - The interest earned on these NCDs will be taxable as per the tax slab of
the investors. TDS will be applicable if the NCDs are taken in the physical
form and the interest amount exceeds Rs. 5,000 in a financial year. But, if you
take these NCDs in your demat account, the company will not deduct any TDS from
the interest income.
Interest on Application Money & Refund - Investors will get interest on their application money @ 9% p.a., from
the date of investment till the deemed date of allotment, and @ 4% p.a. on the
amount liable to be refunded.
Interest
Payment Date & Record Date - STFC will make its first interest payment on April 1, 2014 and then on
April 1st every year. The record date will be 15 days prior to every interest
payment date.
IIFL NCDs Issue vs. STFC
NCDs Issue vs. HUDCO Tax-Free Bonds
The business model
of Shriram Transport Finance is good and its credit rating also suggests that. If you want to go with this issue, prefer
short term period instead of long term period.
The investors
falling in the higher tax brackets should opt for tax-free bonds rather than
these taxable NCDs. So, personally I would go for HUDCO tax-free bonds or the
upcoming IIFCL tax-free bonds rather than these STFC NCDs.
If you don’t fall
in any tax bracket or fall in 10% tax bracket then you can consider this issue.
For more detail about
any other query related investment, you can contact me through my email.
Regards,
Arvind Trivedi
Certified
Financial Planner
