Shriram Transport Finance-NCD-Returns of 11.15%-Should you invest?

Shriram Transport Finance-NCDsShriram Transport Finance-NCD-Returns of 11.15%-Should you invest?

Shriram Transport Finance is issuing Secured redeemable Non Convertible Debentures (NCD’s) next week. It comes with 3 years and 5 years option. The interest rates are up to 11.15% per annum. In this article, I would detail about whether we should invest in Shriram Transport NCD, what are its features and the risks involved in this NCD.

About Shriram Transport Finance Ltd

Shriram Transport is part of Shriram Capital which has significant presence in commercial vehicle financing business, consumer finance, life insurance, stock broking, chit funds etc.

Also read: 10 Romantic and less expensive gift ideas for your girlfriend or wife

Shriram Transport Finance NCD

Shriram Transport is issuing 36 months and 60 months NCD’s. NCD are generally secured. For NCD the assets are backed up for principal and interest. In case unforeseen thing happening to the company, investors of NCD would still get their principal investment and interest.

Features of Shriram Transport NCD

  • The NCD issue would be started from 16-Jul-2013 and would end by 29-Jul-2013.
  • NCD’s are available in 36 months and 60 months period
  • Interest payable annually or at maturity depending on the series of NCD.
  • Bond face value is Rs 1,000.
  • Minimum investment is for 10 bonds means, you need to invest for minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
  • These NCD bonds would be listed in NSE and BSE. Hence these are liquid investments.
  • NCD’s are backed up with security.
  • For some of the series of NCD’s, the repayment of principal is 50% of face value after 48 months and balance 50% of face value after 60 months period
  • NCD’s are reserved as 1) 50% reserved to retail individual investors up to Rs 5 Lakhs.  2) 30% reserved to High net worth individuals (HNI’s) for Rs 5+ Lakhs. 3) 10% reserved to institutional investors 4) 10% reserved to Non-institutional investors
  • NCD’s can be invested through Demat account or Physical form except for Series-III which should be invested only in Demat form.
  • Non-Resident Indians (NRI’s) cannot invest in these NCD’s.
  • The issue size is Rs 375 Crores with an option to retain Rs 375 Crores aggregating to Rs 750 Crores.

Below is the Interest rates chart.

Shriram Transport Finance-NCD

Shriram Transport NCD's – How the returns are taxed?

  • If the NCD’s are purchased through demat account, no TDS would be deducted by the company.
  • If the NCD’s are purchased in physical form, TDS would be deducted if interest exceeds Rs 5,000 as per tax guidelines.
  • Income tax on interest would be based on individual tax slab. Means, irrespective of whether company deducts TDS or not, you should show the interest income in your income tax return and pay necessary income tax.

How the company is doing in terms of financials?

  • Revenues of the company has grown from Rs 5894 Crores (FY 2011-12) to Rs 6,564 Crores (FY 2012-13) indicating a growth of 11.37%
  • Profits increased from Rs 1,257 Crores (FY 2011-12) to Rs 1,360 Crores (FY 2012-13) indicating a profit growth of 8.3%.
  • Non Performing Assets (NPA) of the company is 0.45% (FY2011-12) Vs 0.73% (FY 2012-13).
  • Shriram capital has applied for banking license to RBI during last month which is a positive point for this group.

How to apply for this NCD?

You can download the prospectus from http://www.stfc.in/pdf/news/STFC-NCD-Issue_July-05-2013_Prospectus-PDF.rar

Demat Account holders: If you have demat account, you can apply through your broker after logging into your demat account. Please check with your broker for exact tab where the option is made available to you. At a click of button you should be able to apply this NCD

Physical form: You can apply through Lead Managers, Co-Lead Managers, Lead brokers etc., specified in the prospectus through duly filled application form + cheque for investment amount.

Why to invest?

  • Shriram Transport NCD's are rated by Crisil as AA/Stable and Care as AA+. This indicates high degree of safety for timely serving financial obligations and carry low risk.
  • Company is growing in terms of revenues and profits.
  • NCD’s are secured. Means in case of any unforeseen thing happening to company, investors of NCD would still get the principal and interest. Hence it is safe to invest in such secured NCD’s.
  • Attractive interest rates of 10.9% for 36 months and 11.15% for 60 months NCD

Also read: 10 Safe investment options to invest

Why not to invest?

  • Investment in Finance companies are little risky. The profits indicated now can reduce in future due to increase in interest rate payments. There would be pressure on margins.
  • Due to competition, in future, it may need to reduce interest rates charged to customers and this can lower the margins.

Conclusion: Shriram Transport NCD’s are secured. You can safely invest in such safe investment options and get high returns. Since these are traded on stock exchanges, these are liquid investments too. Thought there are a few drawbacks, I feel you can invest in such safe investment options considering above points.

If you enjoyed this article, share this with your friends and colleagues through Facebook and twitter.

Suresh
Shriram Transport Finance-NCD

14 comments

  • Yamini

    Hi Suresh,

    One query: For Senior citizens wanting to save tax by filling form 15H for bank FD, how does it work?? Where does it need to be submitted evry year and when? Will be great if you can help

    • Hi Yamini, Yes it needs to be submitted every year to bank. You should submit during financial year beginning (Apr). If you file Form 15H you are indicating that the income from FD does not fall under taxable income and bank would not deduct TDS. However at the year end, if you feel that the interest income has exceeded individual tax beneif of Rs 2 Lakhs, you should declare the same and pay tax before filing IT returns.

  • bindu

    Suresh,  Could you let me know which series is best for investing in Shriram IPO.. 2nd, 3rd or 5th series…I am unable .to judge.  My tenure is for 60 months , want to do from demat….  Kindly let me know.

    • bindu

      Suresh, what is the v series…could you please explain clearly…thanks, Bindu

      • Bindu, This is an option in Shriram NCD where you would get specific amount after 48 months and balance after 60 months. This includes investment + interest amount

    • Bindu, It depends. Choose an investment option where you would get money at maturity instead of getting interest on yearly baiss. If you want to invest for 3 years, invest in Series-IV, 5 years means Series-V. This is what I would personally prefer

  • ratan

    Suresh,

    From where you got to know that in a secured NCD, there is protection till Rs 75,000/-

    I dont know about such thing, please mention the source of this.

    Thanks

    Ratan

    • Ratan, Please refer the prospectus of Shriram NCD. It indicates that the NCD’s which are being issued now is secured upto Rs 75,000

      • ratan

        I had gone through the prospectus today morning only.

        I think, you got confused. Note that these bonds are secured, it doesnt mean that an investor is protected till Rs 75,000. Secured means that the company has funds/assets to back the issue up to 75000 lakhs (which is the proposed amount to be raised), if there are defaults in the loan that the company lends then the investor can lose. So, there is no guarantee. I think you should remove the comment regarding the safe upto 75,000 limit.

        Thanks

        Ratan

        • Ratan, Thanks for pointing out. Yes, they are secured and the limit of Rs 75,000 is not applicable. I got confused with some other line items. I have corrected it. Some times I feel that my readers are my strenghts as they point out small errors and help me to correct them to give most accurate data. Thanks Ratan. 

  • lakhvinder Singh

    hi suresh,

    I want to know from where u get these informations, could u please share it with us.

    • Lakhvinder, The knowledge is from 15 years of experience. Source is from various media. I keep monitoring such news as it is my passion. You would get more happniess when you do what you are passionate about

      • fake dhoni

        Please provide links to references used as a courtesy
        To original content owners

        Good job in analysis and recomendation

Leave a Reply

Your email address will not be published. Required fields are marked *