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Shriram Transport Finance Company (STFC) is set to offer investors an effective yield of 9.65-11.15 per cent for secured non convertible debentures (NCDs) of maturity tenure of three and five years. The non-banking finance company plans to raise Rs 375 crore with a greenshoe option (over-subscription) of Rs 375 crore. The issue will open on July 16 and close on July 29.
The issue is open to individual investors, institutional investors, non-institutional investors and high net worth investors. The effective yield for individual investors is 10.90 per cent and 11.15 per cent for a three and five-year maturity tenure, respectively. The effective yield for non-individuals is 9.65 per cent and 9.80 per cent for three and five years, respectively. About 50 per cent of the issue size will be allocated to individual investors. Out of the remaining, 30 per cent is for high net worth individuals and 10 per cent each for institutional investors and non-institutional investors.
The issue has been rated “AA/Stable” by rating agency CRISIL and “AA+” by CARE. Each NCD is worth Rs 1,000 and the minimum application has to be for 10 NCDs. The debentures will be listed on the BSE as well as on the National Stock Exchange.
The frequency of interest payment has a monthly as well as annual option. However, the debentures do not have put and call options. The aggregate of coupon and additional incentive is between 9.40 and 11.15 per cent.
This is the first retail issue of the NCD in FY14. STFC has a record of tapping the market every financial year with NCDs. The purpose of issuing NCDs to retail investors is to diversify the investors portfolios.
The cost of funding turns out to be higher in the retail route as the company needs to offer a higher coupon to attract investors. Besides, there are other costs such as marketing expenses, fees to brokerages, etc.
However, according to experts, in a scenario where banks’ fixed deposit rates are moving south, these NCDs are a good investment option.
Suresh Sadagopan, founder, Ladder7 Financial Advisories, said: “Looking at the company’s track record, it is a good option for investors to lock in their money in the company’s NCD.”
Shriram Transport is primarily engaged in financing used commercial vehicles. It has assets under management (AUM) of over Rs 50,000 crore as of March 2013. The company has the board approval to raise up to Rs 2,000 crore via NCDs this financial year. STFC's holding company Shriram Capital has applied for bank licence.
