Shriram Transport Finance Company Limited has a public issue of secured Non-Convertible Debentures of face value of Rs. 1,000 each. Their target is to aggregate upto Rs 300 crores with an option to retain over-subscription upto Rs 300 crores for issuance of additonal NCDs aggregating to a total of upto Rs 600 crore
The NCDs are being offered in four series with Series I (3 Years) and Series II (5 Years) with Annual Interest payment and Series III (3 Years) and Series IV (5 Years) with no interest payment but redemption at premium (Cumulative). Interest rates (or Yield) offered for 3 and 5 year tenure is 10.25% and 10.50%, respectively. However, individual investors are entitled to an additional incentive of 0.90% per annum, over and above the Coupon% on any Record Date.
So the debt instrument would offer upto 11.40 % return!
The issue date is today , i.e. 26th July, 2012 and would be available upto Aug,10, 2012.Seeing the favorable reports and good credit rating, the issue may see heavy demand
How will the fund be used?
The funds raised through this Issue, after meeting the expenditures of and related to the Issue, will be used for the Company?s various financing activities including lending and investments, subject to the restrictions contained in the Foreign Exchange Management (Borrowing and Lending in Rupee) Regulations, 2000, and other applicable statutory and/or regulatory requirements, to repay the existing loans and its business operations including for capital expenditure and working capital requirements.
Salient Features of Shriram Transport Finance Company Limited:
Issue Size: Public issue of secured non-convertible debentures of face value of Rs. 1,000 each aggregating upto Rs. 300 Crs with an option to retain oversubscription upto Rs. 300 Crs for issuance of additional NCDs aggregating to a total of upto Rs 600 Crs.
Series:
There are four series of the bonds?with Series I (3 Years) and Series II (5 Years) with Annual Interest payment and Series III (3 Years) and Series IV (5 Years) with no interest payment but redemption at premium (Cumulative). Interest rates (or Yield) offered for 3 and 5 year tenure is 10.25% and 10.50%, respectively. The maturity amount for series III and IV are?Rs. 1,373.19 per bond and ?Rs. 1,716.15 per bond
Tax Treatment of Interest Interest earned will be subjected to tax. No tax will be deducted at source.
Nature of Return Fixed Interest Rate like Fixed Deposit. Rating CARE AA+ by CARE CRISIL AA (stable) By CRISIL
Who Cannot Apply: Minors without a guardian name; Foreign nationals; Persons resident outside India including without limitation any Foreign Institutional Investors, Non Resident Indians, Qualified Financial Institutions and Overseas Corporate Bodies.
Listing Proposed to be listed on BSE and NSE
Credit Rating The NCDs proposed to be issued under this Issue have been rated ?CRISIL AA/Stable? by CRISIL and ?CARE AA+' by CARE for an amount of upto Rs. 600 Crs. The rating of the NCDs by CRISIL & CARE indicates high degree of safety regarding timely servicing of financial obligations and carrying very low credit risk.
Comparison to Fixed Deposits:
Comparing the ICICI Bank FD Rate of 10.30% for 3 years and 8.5% for 5 year term, the NCD would perform better as they both have the same tax treatment. For the record, the Post-Tax return for FDs would be 6.39% while for the NCD it would be 7.70% (3 year term)
For the 5 year term, the post tax returns of the FD would be 5.87% while being 7.88% for the NCD.
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