IPO Updates
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SHRIRAM TRANPORT FINANCE
Shriram Transport Finance, India’s largest commercial vehicle {CV} financing company, entering the debt capital market{yet again} with a public issue of secured non convertible debentures {NCD} of face value of Rs. 1,000 each on 26 Jul’2012, to raise Rs. 300 crore with an option to retain another R. 300 crore, taking the total fund raising to Rs. 600 crores. 80% of the total issue has been reserved for individual {retail} investors, while balance 20% for institutions. The issue closes on 10 August’2012, with an option in the company’s hand to close the issue earlier or extend the period. The NCDs, to be listed on NSE and BSE with one NCD comprising a trading lot, would be available only in the demat form with the minimum application among being fixed at Rs. 1,000 thereafter.
The Company is a public debt offer for the fourth time in 4 years, after testing success of its previous such issuance worth Rs. 1,000 crore, Rs. 500 Crore and Rs. 1,000 crore in 2009,2010and 2011 respectively, which received good oversubscription from the public. The issue has been rated “AA/Stable” by CRISIL and ‘AA+’ by CARE, indicating high degree of safety with regard to timely payment interest and principal.
Under the current issue, there are two different tenures being offered to investors 3 Years and 5 Years. Based on type of investor, frequency of interest payment and tenure of instrument, different interest rates rating from 10.25-11.40% P.A are being offered:
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Particulars |
Series I |
Series II |
Series III |
Series IV |
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Frequency of the Interest Payment |
Annual |
Annual |
On Redemption |
On Redemption |
|
Tenure |
3 Years |
5 Years |
3 Years |
5 Years |
|
Coupon Rate {% pa} |
|
|
|
|
|
- Individual Investor |
11.15% |
11.40% |
NA |
NA |
|
- Non-Individual Investor |
10.25% |
10.50% |
NA |
NA |
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Effective Yield {% PA} |
|
|
|
|
|
- Individual Investor |
11.15% |
11.40% |
11.15% |
11.40% |
|
- Non-Individual Investor |
10.25% |
10.50% |
10.25% |
10.50% |
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Put/Call Option |
None |
None |
None |
None |
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Redemption Amount {per NCD} |
|
|
|
|
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- Individual Investor |
Face Value + Accrued Interest |
Face Value + Accrued Interest |
Rs. 1,373.19 |
Rs. 1,716.15 |
|
- Non-Individual Investor |
Rs. 1,340.10 |
Rs. 1,647.90 |
Thus, the highest rate of interest is being offered to individual investors for 5 years tenure and 11.40% per annum. Annual Interest payment and interest on redemption both have the same effective yield, making it in different to an investor.
Shriram Transport Finance is deposit-taking NBFC with assets under management {AUM} of Rs. 40,307 Crore as on March 31’2012. Being the only organized player in the pre-owned CV financing market, its balance sheet is very healthy with capital adequacy ratio {CAR} of 22.26% as of 31 March’2012, against the RBI requirements of 15% .Total income for FY12 was placed at Rs. 5,894 Crore, with net profit of Rs. 1,257 Crore. The company Net net NPAs at Rs. 98 Crore are just 0.45% of net loan assets in FY12, being one of the lower in the Industry. The funds raised via NCD issue will be under financing activities, repaying existing loans, business operations and working capital requirement. Thus the company is fundamentally sound with the strong balance sheet position.
NCDs offer dual advantage of higher coupon rates and liquidity, as they are listed on Stock Exchanges, making attractive investment option for retail investors. vis-à-vis other fixed income products, such as bank FD or debt schemes or mutual funds. Even on post-tax basis, the 5 year investment option offers net return of 7.88% to those falling in the highest tax bracket.
Although listed, NCDs are very thinly traded on the stock exchange hence a comparison yields with peers or previous issue would be in operated.
Current NCDs issue form Shriram group is attractive for retail investors as it offers high ‘fixed returns’ for long term duration of 5 years. Those looking for diversified investments options can apply in the issue, which scores over other ‘fixed income’ investment options.
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