Shriram Transport is the latest company to offer a debt issue, and they’re going to offer NCDs (Non Convertible Debentures), to retail investors which offer interest rates from 11.35% to 11.60% per annum in the reserved category.
The issue size is Rs. 500 crores (with an option to issue additional Rs. 50o crores if there’s demand), and they have divided applicants into three categories.
The prospectus shows that the company already has secured debt of 14,869.37 crores, and the money raised from this issue will add to the existing secured debt.
Retail investors come under the third category, and as long as their application is for bonds worth less than Rs. 5 lacs, they will be considered under the portion reserved under the retail category, and offered the slightly higher interest rate of 11.60% p.a. for 5 years, or 11.35% p.a. for 3 years.
Shriram Transport NCD: Open and Close Date, and Credit Rating
The issue opens on June 27 2011, and closes on July 9 2011. Going by past issues – I think online brokers will give you an option to invest in these, but that will perhaps not start on day one itself.
The issue has been rated AA/Stable by CRISIL and CARE AA+ by CARE, which for whatever it’s worth is a good rating. Further, these are secured debt instruments so that lends them additional safety as well.
Interest Rate and Options of Shriram Transport NCD
They have kept things simple by having only an annual interest rate payment option (no cumulative option), and two series – one for 5 years, and another for 3 years.
Here are the interest rates and other details of retail reserved category.
| Details |
Option 1 |
Option 2 |
| Tenor |
60 months |
36 months |
| Interest Rate |
11.60% |
11.35% |
| Put / Call Option |
Exercisable after 48 months |
NA |
| Interest Payment |
Annual |
Annual |
The Put / Call Option means that at the end of 4 years you can redeem the bonds with the company, or Shriram Finance can redeem them if they so desired.
As far as I know, this is the first issue in which a company has given this option to the investor. Normally, they keep this option for themselves, but the investors don’t have it.
Minimum Investment and Compulsory Dematerialization
Each bond has a face value of Rs. 1,000 and you have to invest a minimum of Rs. 10,000 after which you can invest in multiples in Rs. 1,000 each.
These will be compulsorily in Demat form, so you need a Demat account to invest in these, and can’t hold them in physical form.
One series has a tenor of 5 years, and another tenor of 3 years, but they will both list on the NSE (National Stock Exchange), so if you needed money before maturity – you could sell them in the open market.
However, prices vary in the open market, and if interest rates rise much further then you may even get less than the face value of these bonds.
TDS on Shriram Transport Finance NCD
Since these bonds will only be issued in demat form, and trade on a stock exchange – tax will not be deducted at source on them.
However, this doesn’t mean they are tax free. They will attract tax, just that it won’t be deducted at source. Also, they don’t have any tax benefits at all.
Conclusion
You need to look at it in two parts, – first is attractiveness of offer, and second is security of your money.
Shriram Transport Finance is offering a reasonably good interest rate for the medium term (3 – 5 years).
While banks offer a high interest rate for the short term, they aren’t willing to let you lock on to the higher rate for a period of 5 years or so.
Thinking about safety of money becomes tricky. You can look at smaller companies and decide that the extra percent or two is not worth the risk, or you can look at bigger companies and think that this is safe, but companies like Shriram Transport Finance are a bit harder because they’re somewhere in the middle.
The promoters own a large chunk of the company (slightly more than 40%) so that’s a good sign, there are no pledges on their stock which is a good sign, and the company has been rated well by the issuers which is also a good sign.
However, I’ve always felt that it’s better to be diversified and not expose yourself too much to one stock or one company’s fixed deposit. If something does go wrong, then the loss should not bring your entire portfolio down with it, but should be something that you can deal with and hopefully replace with the other investments you have.
In good times such as these, it’s sometimes hard to think what can go wrong, but you all know too well things do go wrong all the time.
In fact, in the prospectus of this issue itself, they have mentioned a time in 1998 when the BSE suspended trading in their shares due to non – compliance. How would you feel if that were to happen, and you had 50% of your money stuck in this deposit?
So, I’d say keep these things in mind while making your decision, and as always, all questions, comments and observations are welcome!
True thats what has happened. Thanx for the info for Mr Kukreja. I have chked from my frnds and they have got the 40% valur credited in their accounts but without any communication from company in this regard. Even call option was to be execised after 4 years i.e. wef 26/08/2013. There was not any disclosure from the company. Anyways Thanx a lot
You are most welcome Sunny! As far as my experience goes with the communication process of Shriram Transport, they are very fast and active and way better than other NBFCs. I think you’ll get some communication from their side in case your address and email id are correctly captured or updated in the demat account.
Its a coincidence company’s share price and its NCD’ mkt value is almost same. You may pl rechk. I chked at ICICI Direct STFNCD code is INE721A07952, last traded price 626/- I talked to my relationship mgr thr but he was equally confused n could not guide
I’m sorry Sunny, you are absolutely right! It is an NCD with ISIN – “INE721A07952” and Symbol – “SRTRANSFIN N1” on the NSE and “934785” on the BSE.
Actually what has happended, on August 26, 2012, 40% of the Face Value i.e. Rs. 400 per NCD has been redeemed by the company, which has made the NCD price fall by approximately this much. Remaining 60% of the Face Value will be redeemed in 2 tranches – 40% on August 26, 2013 and 20% on August 26, 2014.
Source: http://www.edelweiss.in/Debt/DebtSnapshot.aspx?cn=SRTRANSFIN-N1
Hi Sunny… You’ve mistakenly checked the share price of Shriram Transport Finance Company Limited on the NSE, please check the NCD prices.
Hi
STFNCD Face value was 1000 per NCD but the same are available today in secondary mkt for 625/-. Howcome. aftreall NCDs are not shares. Second, if we buy today @625 are not we assured of redemption at 1000/-. Am unable to understand why anybody will sell at 625 and why no one is buying the same. I chked in Best Bids/Offers there are around 230 sellers in range of 625-630. Pl clear this doubt.
I’ve got NCDs of shriram transport finance co Ltd in july 2011.
my option is of 3yrs and annual interest. I’ve not yet recd any interest
in my account. Please guide me.
Hi Kausar… you must have got the interest payment credited into your bank a/c. in the first week of April 2012, please check.
Hi Shiv,
I had got the payment credited to my account, but the yield appears to be 8% rather than 11.35% pa for the 3 year option. Can you throw some light on why it might be so?
Thanks,
Nishanth
Full details of the investment made and dates of investment and the amount you have received on maturity and whether the initial investment made by you was thro secondary market etc is required please to answer your query.
Hi,
I applied for the initial allotment of STFC NCD (STFCl5) around July 2011, for an amount of Rs 1 lakh and was alloted a total amount of Rs.28000.The option was for 3 years for a rate of 11.35% pa.For the first year ( from July 2011-Mar 2012) , I received an interest of Rs 2292. So was wondering if the difference between the said rate(11.35%) and what I actually received was because the period was for less than 12 months. Even then it should be a bigger amount , though and I understand that there is no TDS involved.
Thanks,
Nishanth
Hi Nishanth,
There is no TDS involved here and the interest paid is also correct.
Please check this:
Date of Allotment – July 20th, 2011,
Interest Due Up To – March 31st, 2012,
No. of days from July 20th to March 31st – 264
Rs. 28,000 * 11.35% * (264/366) = Rs. 2,292.33
Got that,Shiv…Thanks a lot:)
What is the BSE Scrip Code for Shriram Transport finance NCD issue of 60 months NCd carrying a coupon rate of 12.10%.This series was listed in Aug 2011.I dont know the exact date.Thanks.
Your posts and comments are just fantastic and so very informative.I dont know how you manage all this .Please keep it up and may God bless you and your family.
What a lovely compliment – thank you so much!
Most of these broking websites use NSE Codes for STFC NCDs and the Codes are NL, NM, NN, NO, NP and NQ. NL is for 11.60% Bonds and NO is for 11.35% Bonds, both for Individuals/HUF with application upto Rs. 5 Lakhs.
BSE Codes for these Bonds are 934810, 934811, 934812, 934813, 934814 and 934815. 934811 is for 11.60% & 934814 is for 11.35%, again for Individuals/HUFs upto Rs. 5 Lakhs.
Edelweiss is yet to put it on its platform & I hope by today it should be done but these are available on Edelweiss Terminals. I was not able to find it on Kotak Securities site as well. One can buy these bonds through their brokers as they buy other shares/securities as these are available on the NSE/BSE Exchange Terminals.
Thanks Shiv – I think a lot of people are looking for this kind of info, and I’ll do a post on this soon.
Shriram Transport Finance 11.60% NCDs listing happened at Rs. 1020.10 and the price touched a high of Rs. 1035.90 during the day.. for most part of the trading time, it was between Rs. 1030 – Rs. 1033 and closed at Rs. 1031.26.. so the listing happened as per the Grey Market expectations.. The price is expected to move up a bit in the coming few days.. Cheers for the investors who invested without borrowing funds.. 🙂
Pretty impressive, are they visible on your Edelweiss platform already? How does one buy these bonds? I see many STFC bonds available on ICICI Direct, but uncertain which one this code signifies.
Hi.. Listing to happen on Monday – July 18, 2011 on both BSE & NSE..
Source:
http://www.bseindia.com/cirbrief/new_notice_detail.asp?noticeid={E2B52074-087D-4393-8615-CC1A59B67A4F}¬iceno=20110714-19&dt=7/14/2011&icount=19&totcount=19&flag=0
Thanks Shiv, will be interesting to see how it lists. I hope it’s not at a big premium or anything.
I dont think the premium would be more than 1-2% max. and realistically speaking there is a possibility of it trading at a discount on the first day itself bcoz of huge no. of people selling it due to speculative trading or grey market compulsions…
Really at a discount? That will be something now, and I hope that’s the way it turns out too!
I have applied for Rs.300000/- worth of NCDs. Can you tell me if my cheque is recived in your office. Cheque No. 239264 Bank of Maharashtra, Jalgaon Road Branch, Jalgaon. I am worried if this cheque has reached your office or not. It was sent through an agent of Bajaj Capital, Jalgaon.
This isn’t the STFC, so won’t be able to give you any info. Who helped you fill the application form? That person should be able to help you locate information on your check.
The Allotment has been done and all of the valid retail applications have been given the allotment on a pro-rata basis.
Link to the Allotment Status:
http://www.iepindia.com/irncd_detail_2.asp
Thanks Shiv!!!!