9.70% Shriram Transport Finance NCD – Jul’19 – Should you Invest?

Shriram Transport Finance Company Ltd, one of the largest asset financing non-banking finance companies for commercial vehicles has come out with public issue of non-convertible debentures (NCD) offering up to 9.70% interest rate. The issue opens on July 17, 2019 and closes on August 16, 2019.

Shriram Transport Finance NCD – Significant Points:

  • Offer Period: July 17 to August 16, 2019
  • Annual Interest Rates for Retail Investors:Β 9.12% to 9.70% depending on tenure.
  • Additional 0.25% interest for Senior Citizens
  • Price of each bond: Rs 1,000
  • Minimum Investment: 10 Bonds (Rs 10,000)
  • Max Investment Limit for Retail Investor: Rs 10 Lakhs
  • Credit Rating: β€˜CRISIL AA+/Stable’ by CRISIL β€˜IND AA+: Outlook Stable’ by India Ratings and Research
  • NCD Size: Rs 300 crore with option to retain over-subscription upto Rs 10,000 crore
  • Allotment: First Come First Serve
  • Listing: Bonds would be listed on BSE & NSE and will entail capital gains tax on exit through secondary market

Also Read – Know NCD – Investment Tips, TDS and Taxation

Shriram Transport Finance NCD – Investment Options:

There are 10 options of investment in Shriram Transport Finance NCD.

Shriram Transport Finance NCD - July 2019 - Investment Options

Shriram Transport Finance NCD – July 2019 – Investment Options

Also Read:Β 25 Tax Free Incomes & Investments in India

Shriram Transport Finance NCD – Who can Apply?

This issue is open to all Indian residents, HUFs and Institutions.

  • Category I – QIB Investors – 10% of the issue is reserved
  • Category II – Corporate Investors – 10% of the issue is reserved
  • Category III – HNIs Investors – 40% of the issue is reserved
  • Category IV – Retail Individual Investors including HUFs – 40% of the issue is reserved

NRIs cannot apply for this NCD.

Why you should invest?

  1. AA+ Credit rating means very less likely hood of credit default
  2. Unique business model with a strong brand name and a track record of strong financial performance
  3. The interest rates are 2% higher than your regular Bank FDs
  4. No TDS if invested in Demat Form
  5. The NCD is secured, which means the above debt is backed by assets of the company
  6. The interest rate has started to go down, so a good time to lock in high interest rate.

Also Read:Β Highest Interest Rate on Recurring Deposits

Why you should not invest?

  1. There have been issues with some well rated companies like DHFL,
    IL&FS where rating agencies suddenly downgrade the rating. This risk always existed but it has come to forefront in last few months
  2. There are NCDs available in secondary market which have higher yields with similar rating. The problem is low liquidity and hence is difficult to buy in large numbers.
  3. The present Tax Free Bonds are offering yields up to 6.5% in secondary market, which is better investment for People in highest tax bracket.
  4. You can also invest inΒ high rated company fixed deposits

How to Apply?

You can apply online by ASBA facility provided by banks. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work.

Learn:Β How to apply for NCD issues using ASBA?

In case you don’t want to do it online, you can download the application form from company site or Financial Institutions and submit to collection centers.

Shriram Transport Finance NCD - July 2019

Shriram Transport Finance NCD – July 2019

Recommendation:

  1. My recommendation is to invest some part of your Fixed Income investment in this NCD Issue
  2. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
  3. Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value

If you plan to invest in this issue, do it early as most good NCD issues are over-subscribed before the end date.

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