Shriram Transport Finance 11.50% NCDs – July 2014 Issue

by Shiv Kukreja on July 1, 2014

in Articles

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

Shriram Transport Finance Company Limited (STFC) is launching its public issue of non-convertible debentures (NCDs) from tomorrow, July 2, 2014. This will be the first public issue by the company in the current financial year and the same will remain open for three weeks to close on July 22, 2014.

Though the base size of this issue is Rs. 500 crore, the company has filed the draft shelf prospectus for Rs. 3,000 crore. So, even if the company gets a demand of more than Rs. 500 crore for these NCDs, it will retain the oversubscribed portion to the tune of Rs. 3,000 crore.

Here are some of the features of the issue worth considering:

Credit Rating of the Issue – CRISIL has given a rating of ‘AA’ to the issue with a ‘Stable’ outlook, whereas CARE has assigned a rating of ‘AA+’, which is a notch above the rating of the NCD issue of ECL Finance. Moreover, this issue is ‘Secured’ in nature, unlike the ECL Finance issue which was ‘Unsecured’.

Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have the below mentioned percentage fixed in the allotment:

Category I – Institutional Investors – 10% of the issue is reserved

Category II – Non-Institutional Investors – 10% of the issue is reserved

Category III – HNI Individual & HUF Investors investing more than Rs. 5 lakh – 30% of the issue is reserved

Category IV – Retail Individual & HUF Investors investing Rs. 5 lakh or below – 50% of the issue is reserved

Allotment will be made on a first-come first-served (FCFS) basis.

Coupon Rate & Tenor of the Issue – Individual investors, including HNIs, will be incentivised to invest in the issue with the company offering them an additional coupon of 1.15% to 1.35% over and above the base coupon rates applicable for the non-individual investors. These NCDs will be issued for a period of 36 months, 60 months and 84 months.

For 36 months, 60 months and 84 months, the individual investors will earn 11%, 11.25% and 11.50% per annum respectively. Apart from the annual and cumulative interest payment options, this time around the company has decided to offer monthly interest option as well. But, the monthly interest payment option will not be there with the 36 months maturity period.

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Additional Coupon for Senior Citizens – Like some of the fixed deposits, senior citizens will get an additional interest rate of 0.25% p.a., but only the first allottees. If any of the senior citizen investors buys these NCDs through secondary markets post the initial public offer, he/she will not be entitled to this additional 0.25%. For monthly interest payment option, this rate would be 0.23% extra. For Series VI, VII and VIII, senior citizens will get Rs. 1,377.29, 1,723.87 and 2,177.70 respectively at the end of the tenure.

Minimum Application Size – STFC has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.

NRIs Not Allowed – Non-Resident Indians (NRIs), foreign portfolio investors (FPIs) and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

Demat/Physical Option – Investors can apply for these NCDs either in physical form or demat form, whichever they are comfortable with, except for Series IV and Series V NCDs i.e. NCDs which offer to pay monthly interest. Series IV and Series V NCDs will be allotted compulsorily in the demat form.

Taxability & TDS – As these are not tax-free debentures, the investors will be liable to pay tax on the interest income as per their individual tax brackets. Also, though the interest income is taxable, NCDs taken in demat form will not attract any TDS.

Listing, Lock-In Period – These NCDs will get listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE) and the listing will take place within 12 working days after the issue gets closed.

Also, there is no lock-in period with these NCDs i.e. as and when these NCDs get allotted, the investors can sell their holdings on any of the exchanges whenever they want.

Conclusion

As compared to the NCD issue of ECL Finance which offered an effective annualised interest rate of 12.68%, the effective interest rate of 11.25% for 60 months seems a bit unattractive to me, despite of the fact that Shriram Transport Finance is a big company and quite superior fundamentally and even as these NCDs are ‘Secured’ in nature.

Having said that, STFC is a good company fundamentally. All those investors who could not invest in the past NCD issues and are willing to park their money for long periods of 36 months to 84 months can consider investing in this issue. These NCDs are way superior than company NCDs in terms of liquidity, safety and returns.

If I were to park my money in this issue, I would have opted for a tenure of 60 months with the monthly interest payment option or for a tenure of 60 months with the annual interest payment option.

Application Form of Shriram Transport Finance NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in STFC NCDs, you can reach me at +91-9811797407

{ 27 comments… read them below or add one }

Ravi July 3, 2014 at 11:56 AM

Hi Shiv,

Please post first day subscriptions.

Reply

Shiv Kukreja July 3, 2014 at 12:11 PM

Day 1 (July 2) Subscription Figures:

Category I – Rs. 10 crore as against Rs. 300 crore reserved
Category II – Rs. 19.55 lakh as against Rs. 300 crore reserved
Category III – Rs. 1,216.36 crore as against Rs. 900 crore reserved
Category IV – Rs. 340.34 crore as against Rs. 1,500 crore reserved
Total Subscription – Rs. 1,566.90 crore as against total issue size of Rs. 3,000 crore

Reply

DPP July 3, 2014 at 2:07 PM

Thanks Shiv for the article. Do you know what are the other upcoming NCDs?

Reply

Shiv Kukreja July 3, 2014 at 2:12 PM

Thanks DPP !!
As of now, I am not aware about any issue in the pipeline. I’ll share it here as soon as I get any info about it.

Reply

Shiv Kukreja July 3, 2014 at 8:41 PM

Having a great response in the first two days itself, Shriram Transport Finance has decided to close the issue tomorrow i.e. June 4, 2014.

Reply

Shiv Kukreja July 3, 2014 at 9:45 PM

Day 2 (July 3) Subscription Figures:

Category I – Rs. 10.04 crore as against Rs. 300 crore reserved
Category II – Rs. 34.55 lakh as against Rs. 300 crore reserved
Category III – Rs. 1,436.60 crore as against Rs. 900 crore reserved
Category IV – Rs. 427.25 crore as against Rs. 1,500 crore reserved
Total Subscription – Rs. 1,874.23 crore as against total issue size of Rs. 3,000 crore

The issue is getting closed tomorrow.

Reply

BBT July 3, 2014 at 10:39 PM

Hey Shiv,

Why aren’t you guys covering the Muthoot Fincorp NCDs which were issued today? What’s your outlook there? Volumes for the first day there have remained very low.

Thanks.

Reply

Shiv Kukreja July 3, 2014 at 11:08 PM

Hi BBT,

We cover NCD issues of Muthoot Finance and not Muthoot Fincorp as I think Muthoot Fincorp is a relatively smaller player in this segment and we haven’t analysed the financial standing of the company.

Reply

Shiv Kukreja July 5, 2014 at 6:33 PM

Day 3 (July 4) Subscription Figures:

Category I – Rs. 10.03 crore as against Rs. 300 crore reserved
Category II – Rs. 55.05 lakh as against Rs. 300 crore reserved
Category III – Rs. 1,466.41 crore as against Rs. 900 crore reserved
Category IV – Rs. 508.40 crore as against Rs. 1,500 crore reserved
Total Subscription – Rs. 1,985.39 crore as against total issue size of Rs. 3,000 crore

The issue stands closed on July 4, 2014.

Reply

BBT July 7, 2014 at 11:10 AM

Hey Shiv,

Is it possible to have applied and bid for these NCDs on day 3 and not get any allocation due to oversubscription? My broker is telling me this.

Thanks.

Reply

Shiv Kukreja July 7, 2014 at 11:21 AM

Hi BBT,
I think it is highly unlikely, but not impossible either. I think you should get full allotment if your application was for less than Rs. 5 lakh. Ultimately it depends on STFC how much money they decide to retain.

Reply

Vishal July 8, 2014 at 10:09 AM

Hi Shiv,
Thanks for your extensive coverage of investment options for retail investors like me.
When can we expect these NCD’s to be credited to our demat accounts ?
Regards

Reply

Ranka July 9, 2014 at 5:04 PM

Regarding Aviva Insurance i have sent to you the details
i have not received any reply from your side

Reply

Ravi July 18, 2014 at 7:50 PM

Hi Shiv,

Any idea when these NCDs will get listed?

Reply

Shiv Kukreja July 19, 2014 at 1:01 PM

Shriram Transport Finance NCDs got listed on both the exchanges yesterday i.e. July 18th.

Here are the BSE and NSE codes for the same:

Series I – BSE Code – 935128; NSE Code – Y7
Series II – BSE Code – 935130; NSE Code – Y8
Series III – BSE Code – 935132; NSE Code – Y9
Series IV – BSE Code – 935134; NSE Code – YA
Series V – BSE Code – 935136; NSE Code – YB
Series VI – BSE Code – 935138; NSE Code – YC
Series VII – BSE Code – 935140; NSE Code – YD
Series VIII – BSE Code – 935142; NSE Code – YG

Deemed date of allotment has been fixed as July 15, 2014. Interest will be paid on July 15 every year under the annual interest payment option and on 1st of every month under the monthly interest payment option starting September 1st.

Reply

Madhab July 21, 2014 at 11:36 AM

Thanks Shiv, for the update..
Your site has become the de facto place for me to get updated info on NCDs.

Keep up the good work!

-Madhab

Reply

Shiv Kukreja July 28, 2014 at 9:45 PM

Thanks Madhab for your encouraging words!

Reply

Rajan July 26, 2014 at 10:25 AM

Hi shiv,
Will retail investor who buy these from secondary market get extra interest since 7yrs ncd is shown coupon rate 10.15% in script name/description?
Also do u know by wen tranche 2 of this ncd coming up?

Reply

Shiv Kukreja July 28, 2014 at 10:00 PM

Hi Rajan,
Yes, the individual investors, whether retail or HNI, will get the higher rate of interest. Also, there is no announcement by the company as yet about its 2nd tranche.

Reply

shailesh kumar July 27, 2014 at 8:26 PM

hi shiv, this article is useful for me. Thanks !!

Reply

Shiv Kukreja July 28, 2014 at 10:01 PM

Thanks Shailesh!

Reply

Rajan July 28, 2014 at 11:38 PM

Thanks Shiv !!

Reply

Ravi August 4, 2014 at 4:31 PM

Hi Shiv,

I got Series – 3 allotment. Later I purchased some debentures from market. The total units crossed 500. Will I be treated as individual investor? What is the impact on the interest? will it be still 11.5 p.a. Till what amount I can invest like this?

Reply

J.N.CHOUDHURY November 18, 2014 at 7:14 PM

Want to start monthly income through fixed deposit

Pl.confirm the existing interest rate for monthly option

thnx>>>> JNC

Reply

harinee August 7, 2015 at 10:40 AM

Hi
Need some advise. One of my STFC NCD seems to have matured, I got a deposit suddenly today. This was a 5-year one, how is the redemption amount calculated and how will the taxation be?
Should I declare this in returns next year?

Thanks

Reply

nitesh patel March 29, 2016 at 3:30 PM

dear shiv I have just sold my holding in stfcl yb series ncd today at 1033 so I want to know that if I purchase these ncd at lower levels than I will get the same monthly interest as earlier or not

Reply

shanker ramamurthy April 16, 2016 at 7:50 AM

Can i sell the ncd from dmate account what is the procedure can any body explain.

Reply

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