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Shriram Transport Finance NCDs Offer Interest Up To 9.1%: Should You Invest?
At a time when fixed deposit rates are low, Indian investors are looking at alternatives to grow their funds. One such opportunity at the start of 2020 is an NCD issue that is scheduled to be offered by Shriram Transport Finance.
This asset financing Non-Banking Finance Company will be issuing its Non-Convertible Debentures (NCDs) in the market on 6 January. The issue's base size is set at Rs 200 crore with the option to retain up to Rs 1,000 crore by the company in case of oversubscription.
The Tranche 2 Issue of these Secured Redeemable NCDs with a face value of Rs 1,000 each will close for subscription on 22 January 2020.
Tenure
| Series | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|
| Frequency of Interest Payment | Monthly | Monthly | Monthly | Annually | Annually | Annually | Cumulative | Cumulative |
| Tenor | 3 Years | 5 Years | 7 Years | 3 Years | 5 Years | 7 Years | 3 Years | 5 Years |
| Coupon Rate (Retail) | 8.52% | 8.66% | 8.75% | 8.85% | 9.00% | 9.10% | NA | NA |
| Effective Yield (per annum) | 8.85% | 9.00% | 9.10% | 8.84% | 8.99% | 9.09% | 8.85% | 9.00% |
| Amount on Maturity | Rs 1,000 | Rs 1,000 | Rs 1,000 | Rs 1,000 | Rs 1,000 | Rs 1,000 | Rs 1,289.99 | Rs 1,539.35 |
Ratings
This issue is rated as CRISIL AA+/Stable by CRISIL, CARE AA+/Stable by CARE and IND AA+/Stable by India Ratings and Research Private Limited. Instruments with such ratings are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry very low credit risk.
How to invest?
You can invest in the public issue of NCDs by submitting an application form via your bank or broker (only self-certified syndicate banks) authorizing them to block funds towards the issue.
Liquidity
The NCDs are proposed to be listed on NSE and BSE. If you wish to not stay invested till maturity, you can sell these on the stock exchanges.
Should you invest?
While the interest rates offered on these NCDs are slightly higher than fixed deposits and government-backed schemes like National Savings Certificate, they hold the risk of default. Further, interest earned on NCDs is fully taxable.
While Shriram Transport Finance has a strong reputation, it is only advisable to invest in NCDs if you are an investor with a high-risk appetite.
Further, if you do choose to invest, it is best to hold the NCD till maturity unless you have an expert that can help you sell at the right time to make high returns.
