The NCDs offer three options for investors with three, four and five years. The coupon rates on these tenures works out to 11 per cent, 11.25 per cent and 11.50 percent annually.
Investors can choose from the annual and the cumulative option. In fact, the effective yields of 12.27 percent p.a., 13.30 percent p.a. and 14.46 percent p.a. over three, four and five years respectively for the cumulative option make the NCDs an attractive proposition.
Of the issue size, 80 percent of the issue is reserved for individuals; 40 percent being earmarked for retail investors (those investing in less than Rs. 5 Lacs) and 40 percent for high networth individuals (HNIs).
Should you subscribe?
The coupon rates on the various tenures makes the NCDs far more attractive then bank deposits. Banks offer that greater element of security vis-a-vis non banking finance companies. However, it's pertinent to point out that Shriram City Union has a very strong pedigree.
Shriram City is the largest small enterprise finance company in India in the small loan segment (loans between Rs. 1 Lac to Rs. 10 Lacs. Source: "Analysis of Small Loan Credit Market for NBFCs in India - June 2013" by Frost and Sullivan). It is also a prominent provider of loans against gold, financing for two wheelers, pre-owned and new vehicle loans, personal loans and housing loans (the last named product being disbursed through a subsidiary).
Overall, one would recommend subscription going by the pedigree and the interest rates.
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