Shriram Transport Finance NCD: Issue Review, Analysis & Details of Secured Non-Convertible Debentures: Finance Trading Times

Shriram Transport Finance NCD: Issue Review, Analysis & Details of Secured Non-Convertible Debentures

Details about Shriram Transport Finance NCD Secured Non-Convertible Debentures Issue July - August 2012
It was in December 2011 we saw the Muthoot Finance NCD in the market.
Now, the same Shriram Transport Finance company has come out with its NCD issue or Non-Convertible Debentures issue which is currently open.
Let's start with the basics first. Shriram Transport Finance NCD

What is a NCD or Non-Convertible Debentures?
NCD or Non-Convertible Debentures can be termed as a kind of special category of loan, which cannot be converted to a stock (hence the name Non-Convertible). So when you invest into any NCD of any company, you give it a loan. The amount of Coupon rate that you are promised by the company acts as a interest which you expect to recieve for your loan.
NCD's usually offer a higher rate of return as compared to Bank Fixed Deposits as well as FMP or Fixed Maturity Plans (What is a FMP: Explained).
Important thing for investor to note here is that NCD are kind of unsecured bonds, which may not be backed by any collateral. Hence, when you are investing in an NCD, it indicates that you are actually offering a kind of unsecured loan to the NCD company. Since it is unsecured, it offers higher rate of interest (more risk-more return). Also, since it is non-convertible, these NCD's cannot be converted to stocks or equity of the company.

Shriram Transport Finance NCD: Review, Analysis and Calculations

What are the NCD dates for Shriram Transport Finance NCD?
The Shriram Transport Finance NCD is open from July 26, 2012 and closes on August 10, 2012.

What is the issue size of Shriram Transport Finance NCD?
Shriram Transport Finance NCD issue is expecting to raise around 300 Crore Rs. through the Shriram Transport Finance NCD issue. This can extend further in case of an over-subscription to another Rs. 300 Crore.

What is the minimum investment amount required for investing in Shriram Transport Finance NCD?
Each debenture is having a face value of Rs. 1000 and minimum 10 debentures can be applied for. Hence, the minimum application amount comes to Rs. 10,000.

What are the various investment options available in Shriram Transport Finance NCD?
There are 4 options available for investing in Shriram Transport Finance NCD - coming with 4 different maturity periods of 36 months to 60 months.
There are 4 series of bonds:
1) Series I with 3 years tenor and annual coupon frequency
2) Series II with 5 years tenor and annual coupon frequency
3) Series III with 3 years tenor and redeeming at a premium
4) Series IV with 5 years tenor and redeeming at a premium

What is the additional rate of interest for Senior citizens?
No - there is no additional rates offered to Senior citizens

What is the effective interest rates offered by Shriram Transport Finance NCD?
Depending upon the various maturity period listed above, the effective yield on the Shriram Transport Finance NCDs will vary from a low of 10.25% to 10.5% per annum. Please note that these are yields. Coupon rates vary from 11.15% to 11.40%

How will the capital collected through Shriram Transport Finance NCD will be used by the company?
The money or capital collected through the Shriram Transport Finance NCD will be used for further business expansion and enhance lending capacity.

What are the ratings assigned to Shriram Transport Finance NCD?
Ratings are from CRISIL as 'AA/Stable' and 'CARE AA+' by CARE to the Shriram Transport Finance NCD issue.
As claimed on the company website, the ratings indicate stability regarding the financial obligations on part of the company.

Where will the Shriram Transport Finance NCD be listed?
The Shriram Transport Finance NCD will be listed on the BSE as well as NSE.

Will there be any tax benefit available in Shriram Transport Finance NCD?
No. There will be no tax benefit available in Shriram Transport Finance NCD.
Instead, all the income that you will earn as interest from the Shriram Transport Finance NCD will be taxable. Company will NOT deduct any TDS while paying the interest - it will be the responsibility of the investor to declare that income and pay taxes on it.
Hence, the investors should take into account the post tax effective returns calculation before jumping onto investing in these Shriram Transport Finance NCD based upon the high double digit interest it is offering.
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