Shriram City Union NCDs: High interest rates make it attractive

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Shriram City Union NCDs: Interest rates make it attractive
Shriram City Union is issuing non convertible debentures (NCDs) aggregating Rs 100 crores with an option to retain oversubscription of another Rs 100 crores. The issue opens for subscription on Nov 25. The NCDs are to be listed on the Bombay and the National Stock Exchange.

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.

The views expressed in this article may not reflect those of Greynium Information Technologies Pvt Ltd, its subsidiaries and associates. The author has made every effort to ensure accuracy of information provided; however, neither Greynium Information Technologies Pvt Ltd, its subsidiaries and associates, nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to buy, sell in precious metal products, commodities, securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author of this article do not accept culpability for losses and/or damages arising based on information in this article.

Read more about: ncds, shriram city union
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