Shriram 9.5% NCD Issue: Should You Invest?

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    After a gap of almost 4 years, the vehicle financing NBFC company has come up with a NCD issue to raise close to Rs.5000 crore from the market. So, here is a breakdown in respect of the different element of the public issue and should you be considering the offer in light of higher interest rate regime.

    Shriram 9.5% NCD Issue: Should You Invest?

    1. Issue objective: The company plans to raise R. 1000 crore with a green shop option to raise an addtional Rs. 4000 crore that takes the total amount to Rs. 5000 crore. The company aims to deploy the funds from the proceeds for its financing and lending activities, to repay principal and interest in relation to existing borrowings and other corporate purposes.

    2. Issue details: The secured NCD issue opens today i.e. June 27 and is scheduled to close on July 20, 2018 unless the company closes the subscription before-hand. The secured NCDs are accorded CRISIL AA+ and India Ratings Stable rating. Minimum investment amount for the issue is pegged at Rs. 10000.

    3. Coupon rate: Annual and monthly interest payment option is available with the issue. Here's a return chart for the different tenure and under different payment mode options:

    Series I II III IV V VI VII
    Tenure 5 years 10 yrs 3 yrs 5 yrs 10 yrs 3 yrs 5 yrs
    Interest payment mode Monthly Monthly Annually Annually Annually Cumulative Cumulative
    Coupon rate 9.03% 9.13% 9.20% 9.40% 9.50% NA NA

    Senior citizens are entitled to an additional 0.25% to senior citizens from both the retail and HNI investor category.

    4. Allocation to the issue: It remains pre-decided with reservation proportion in the following ratio i.e QIBs, NIIs, HNIs including HUFs, resident individuals share a reserved amount of Rs. 500 crore, Rs. 500 crore, Rs. 2000 crore and Rs. 2000 crore respectively.

    5. TDS: There is no option to apply for the issue in certificate form and hence TDS in demat form will not attract TDS. But the interest accrued on the investment shall be subject to tax when filing return.

    Conclusion: Given the interest rate regime i.e. going on the higher side in light of the several macro factors, investors can gain substantially higher as other debt instruments such as bank FDs do not provide such high returns. More so post tax return from these instruments also go down after TDS payment.

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