For a tenure of 36, 60 and 84 months (3,5, and 7 years), the company is offering an interest rate of 11.25, 11.5 and 11.75 per cent respectively for individual investors.
Now, these rates are excellent considering that they beat bank fixed deposit rates, which can offer you a deposit rate of around 8.75 per cent to 9.75 per cent in the top class banks. Thus, the NCD rates being offered by Shriram Transport Finance is a good 2 per cent over and above the bank rates.
The issue of Shriram Transport NCD is opening from today (Oct 7) and will close on Oct 21, 2013. However, the company has an option to close on such earlier date or extended date up to a period as may be decided at the discretion of the committee of Directors of the company.
The NCDs being offered by Shriram Transport have been rated AA/stable by CRISIL and AA+ by CARE, indicating a high level of safety.
The non convertible debentures also offer liquidity given that they would be listed on the Bombay and the National Stock Exchange of India. However, it must be noted that the NCDs traded on the exchanges are low in volumes and hence you may find it difficult to sell large chunks at one go.
It's also important to note that there would be no TDS deducted on the debentures, however, the interest earned is taxable.
This means that the interest has to be added to total income to determine tax liability, if any.
Overall, the Shriram Transport NCDs combine some good features like high yields, easy liquidity and relative safety.