9.86% Shriram City Union Finance NCD August 2019 Review

Shriram City Union Finance NCD August 2019 Review


NBFC sector is suffering with shortage of funds. There are several companies that are coming up for NCDs now. Shriram City Union Finance NCD for August 2019 Tranche II would open for subscription on 21st August, 2019. It is issuing secured NCD’s now. The yield is as high as 9.86% per annum and attracting investors now. It is offering NCDs of 24 months, 36 months and 60 months tenure. Currently banks are offering low interest rates between 5% to 8% and investors are looking high interest rate NCD’s. Should you invest in Shriram City Union Finance NCD of August 2019? What are the risk factors you need to consider here?

Also Read: Top 10 Best SIP Mutual Funds to invest for next 10 years

About Shriram City Union Finance Limited


Shriram City has a comprehensive range of offerings comprising finance for Two Wheelers and Three Wheelers, Four Wheeler Finance (both new and pre-owned passenger and commercial vehicles), Personal Loans, Small Business Loans, and Loan against Gold. This has made Shriram City a dominant player in the field and the only NBFC to offer such a wide range of products under one roof.

About Shriram City Union Finance Limited Tranche II Secured NCDs


Shriram City Union Finance is issuing secured redeemable Non Convertible Debentures (NCD’s) to the tune of Rs 100 Crores with an option to retain another Rs 900 Crores over subscription totaling to Rs 1,000 Crores. It comes with 8 different options, which contains 24 months, 36 months and 60 months tenure NCDs.

What are Non Convertible Debentures?


If you would like to know more about NCDs, you can check this video.

About Shriram City Union Finance August 2019 Secured NCD


They are offering secured NCD’s now in August 2019. The NCDs would constitute secured and senior obligations of the Company and shall be first ranking pari passu with the existing secured creditors on all loans and advances/ book debts/ receivables, both present and future of Company equal to the value one time of the debentures outstanding plus interest accrued thereon, and subject to any obligations under applicable statutory and/or regulatory requirements.

Features of Shriram City Union Finance NCD of August 2019


Issue start date: 21-August-2019

Issue end date: 19-September-2019

NCD’s are available in 8 different options.

The interest of these NCDs is payable monthly, yearly and on maturity depending on the option chosen.

Shriram city union finance ncd price is Rs 1,000 per bond.

Minimum investment is for 10 bonds means, you need to invest for a minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.

These NCD bonds would be listed on BSE. Hence, these are liquid investments.

Non-resident Indians (NRI’s) cannot invest in these NCD’s.

CARE has rated these NCDs as CARE AA+/Stable and CRISIL rated them as CRISIL AA/Stable. The ratings of the NCDs by CARE and CRISIL are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

AK Capital Services and Edelweiss Financial Services are the lead managers for this issue.

You can download Shriram City Union Finance NCD Prospectus August/Sept 2019 details here.

Here are the interest rates on the August / September 2019 NCD’s of Shriram City Union Finance


Shriram City Union Finance August 2019 NCD Issue - Interest and Yield Chart

What is the issue break-up?


Institutional Portion – 10% of the issue

Non Institutional Portion – 10% of the issue

HNIs – 40% of the issue

Retail Investors – 40% of the issue

How is the company doing in terms of Financials?


Here are the standalone financials:

1) Its revenues are at Rs 5,156 Crores in FY2018 and Rs 5,778 Crores in FY2019.

2) Its profits are at Rs 710 Crores in FY2018 and Rs 988.8 Crores in FY2019.

3) Net NPA is at 4.97% for FY2018 and to 5.02% in FY2019.

Why to invest?


1) It is dominant player in the field and the only NBFC to offer such a wide range of products under one roof.

2) Attractive interest rates where one can get 9.86% yield.

3) It is issuing secured NCDs which are safe to invest.

Why not to invest in Shriram City Union Finance August 2019 NCD?


1) Its NPA is highest in the NBFC industry.

2) They are affected by volatility in interest rates for both their lending and treasury operations, which could cause their net interest income to decline and adversely affect their return on assets and profitability.

3) Their subsidiary, Shriram Housing being an HFC, has significant exposure to the real estate sector and any negative events affecting this sector could adversely affect their business and result of operations.

4) Their business requires substantial capital, and any disruption in funding sources would have a material adverse effect on their liquidity, cash flows and financial condition.

5) If they are unable to manage the level of NPAs in their loan assets, their financial position and results of operations may suffer.

6) High levels of customer defaults could adversely affect their business, financial condition and results of operations their business is subject to various regulatory and legal requirements governing the banking and financial services industry in India. Also, future regulatory changes may have a material adverse effect on their business, results of operations and financial condition.

7) They and their Subsidiary are subject to periodic inspections from RBI and NHB, respectively. Noncompliance with RBI or NHB observations may have a material adverse effect on their and their Subsidiary’s business, financial condition or results of operation.

8) They may not be able to accurately appraise or recover, on a timely basis or at all, the full value of collateral or amounts which are sufficient to cover the outstanding amounts due under defaulted loans, which could adversely affect their business and results of operations.

9) Since they handle high volumes of cash and gold jewellery in a dispersed network of business outlets, they are exposed to operational risks, including employee negligence, fraud, petty theft, burglary and embezzlement, which could harm their results of operations and financial position. Further, their employees may be the target of violent crime, such as thefts and robberies, which may adversely affect their business, operations and their ability to recruit and retain employees.

10) You can refer all risk factors in the Final prospectus of the company.

How to apply Shriram City Union Finance NCD Issue of Aug/Sept 2019?


You can apply these NCDs in demat form only. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. The process of applying NCD would be through ABSA (Your amount would be blocked initially and upon allotment, your amount would be deducted and NCD allotment would be done, else your amount would be unblocked) You can reach out to any of the lead managers websites to know more details on how to apply them.

How interest received from Shriram City Union Finance August 2019 NCD is taxed?


Since you need to apply through the demat form only, there would not be any TDS on the interest received the NCD’s. It is immaterial whether the company would deduct TDS or not, one has to declare the interest in their income tax returns and pay income tax based on the individual tax bracket.

When this Shriram City Union Finance NCD of 2019 would get listed on BSE?


These Shriram City Union Finance Limited NCDs of August, 2019 would get listed after 6 working days from the date of closure.

How to check Shriram City Union Finance NCD allotment status 2019


You can check NCD allotment status of Shriram City Union Finance Status in 2019 at this link.

Should you invest in Shriram City Union Finance NCD of August 2019?


Shriram City Union Finance NCD’s of Tranche-II issue in 2019 offers high interest rates. Banks are reducing the interest rates month on month and the interest rates are between 6% to 8% per annum. These NCDs offer the highest interest rates compared to such bank FDs. Its credit rating is also good. However, these can change in future without any notice. Currently we are seeing NBFC crisis. If one would like to take these risk factors into consideration and move-on, they can invest in these high risk NCDs, else stay away from such NCDs.

Readers, do you feel these NCDs are good to invest?

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Suresh KP

Shriram City Union Finance NCD August 2019 Issue Review

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