In a first-of-its kind public offering, Shriram Transport Finance has reserved 80 per cent of its Rs 300-crore non-convertible debenture (NCD) issue for individual investors. The NCDs have coupon rates of 11.15 per cent for three years and 11.4 per cent for five years.
The issue opens on July 26 and closes on August 10. The non-banking financial company has the option to retain Rs 300 crore of oversubscription.
“To diversify the investor base, the company has decided to target the retail segment with higher allotment and coupon rates, compared to other categories,” said a merchant banker.
Once sold in the secondary market, the coupon rates would be reduced by 90 basis points. The NCDs would be listed on the National Stock Exchange and the Bombay Stock Exchange.
“With medium tenors and attractive coupon rates in a falling interest rate scenario, it should not be difficult to garner good response,” the official added.
In 2011-12, Shriram Transport Finance had raised Rs 1,000 crore through this route. This financial year, though it had planned to raise that amount in the first tranche, considering the current investment slowdown, the issue size was trimmed to Rs 600 crore, with a focus on retail participation.
Investors would have to apply for at least Rs 10,000, or 10 NCDs, and in multiples of Rs 1,000, or one NCD, thereafter. The company has reserved 40 per cent of the issue for individuals investing more than Rs 5 lakh and 40 per cent for retail investment of up to Rs 5 lakh.
The NCDs would be issued in four series, including two in which the interest would be paid annually.
The redemption amount for individuals in the remaining series after three years would be Rs 1,373.19 per NCD, while after five years, it would be Rs 1,716.15 per NCD, subject to tax deducted at source.
The NCDs have been rated AA/Stable by Crisil and AA+ by CARE. Kotak Mahindra Capital, AK Capital, JM Financial Securities and ICICI Securities are the lead managers for the issue.
Other non-banking financial companies are also gearing up to tap the retail segment before infrastructure finance companies crowd out the second half of the financial year with tax-free bond issuances. Shriram City Union Finance and L&T Finance may also come up with similar offerings. However, these would depend on the success of the Shriram Transport Finance NCD issue.
