Shriram Transport Secured NCD – July 2014 – Should you Invest?

Shriram Transport Secured NCD - July 2014 - Should you Invest

Shriram Transport NCD – July 2014 – Should you Invest?

Shriram Transport is part of Shriram Capital and is a dominant player in commercial vehicle and pre-owned vehicles finance. It has come out with NCD (non-convertible debentures) issue of Rs 1,500 crore with an option to retain additional Rs 1,500 crore aggregating to Rs 3,000 crore.

Shriram Transport NCD – Significant Points:

  • Offer Period: July 2 – July 22, 2014
  • Annual Interest Rates for Retail Investors: 10.71% to 11.50% depending on tenure
  • Additional 0.25% Interest to Senior Citizens
  • There is also an option where the money doubles in 7 Years (84 Months)
  • Price of each bond: Rs 1,000
  • Minimum Investment: 10 Bonds (Rs 10,000)
  • Max Investment Limit for Retail Investor: Rs 10 Lakhs
  • Credit Rating: CARE AA+’,  ‘IND AA+’ by India Ratings & Research & ‘CRISIL AA /Stable’
  • All NCD option are Secured
  • Allotment: First Come First Serve
  • Listing: Bonds would be listed on BSE & NSE and will entail capital gains tax on exit through secondary market
  • NRIs cannot invest in the issue

Shriram Transport NCD – Investment Options:

There are 8 options of investment in Shriram Transport NCD.

Shriram Transport NCD - Investment Options for July 2014 Issue

Shriram Transport NCD – Investment Options for July 2014 Issue

Why you should invest?

  1. The financials of the company is healthy
  2. Invest-able Credit rating of AA+
  3. Pan India presence with more than 18,000 employees and 35 years of history
  4. The NCD is secured, which means the above debt is backed by assets of the company
  5. The interest rates are better than your regular FDs

Why you should not invest?

  1. Though NCDs are listed on stock exchange, the liquidity is very low. So it might be difficult to exit anytime you want. You might have to sell at discount to exit
  2. There are other competing NCDs with similar interest rates

How to Apply?

If you have Demat account apply through that. It’s the easiest way to apply and also avoids a lot of hassle in terms of KYC and paper work
In case you don’t have Demat Account, you can download the application form from company site or Financial Institutions and submit to collection centers.

Conclusion:

  1. My recommendation is to invest some part of your Fixed Income investment in this NCD Issue
  2. You should always have diversified portfolio be it fixed deposit, NCD or equity investment
  3. Its good idea to remain invested till maturity because liquidity on exchanges are low and hence you would get lower than market value

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