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Shriram Transport Finance STFC NCD July 2014 – Details & Review

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Shriram Transport Finance Company (STFC) has opened its public issue of NCDs on 02-July-2014 & it closes on 22-July-2014 offering 8 investment options with yield upto 11.75%. 
 
This is the first NCD issue of this financial year from STFC. The comapnby has few NCD issues in 2013-2014  

Type of Instruments – Secured Redeemable NCDs

Size of Issue – Rs 1000 crore through this issue, with an option to retain oversubscription upto Rs 1000 crore, aggregating to a total of upto Rs 2000 crore.

Listing – Proposed to be listed on NSE & BSE

Credit Rating – AA/stable by CRISIL and AA+ by CARE

 

Investment options – Annually / Cumulative Interest for 36 months, 60 months , 84 months

Annual Interest Payment:For Individual Investors

STFC NCD July 2014 –  Annual Interest Option
       
Series I II III
Tenure 36 months 60 months 84 months
Base Coupon Rate 9.85% 10% 10.15%
Incentive Rate 1.15 1.25 1.35
       
Effective Rate if NCD held till record date 11% 11.25% 11.50%

Monthly Interest Payment :For Individual Investors

STFC NCD July 2014 –  Monthly Interest Option
     
Series IV V
Tenure 60 months 84 months
Base Coupon Rate 10.71% 10.94%
Incentive Rate    
     
Effective Rate if NCD held till record date 10.71% 10.94%

Cumulative Option:For Individual Investors

STFC NCD July 2014 –  Cumulative Option
       
Series VI VII VIII
Tenure 36 months 60 months 84 months
Maturity value 1368.02 1704.62 2143.79
       
       
Effective Rate if NCD held till record date 11% 11.25% 11.50%

About Company

STFC is one of the largest asset financing NBFCs in India

STFC is part of the “SHRIRAM” conglomerate which has significant presence in financial services viz., commercial vehicle financing business, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and units of mutual funds. Apart from these financial services, the group is also present in non-financial services business such as property development, engineering projects and information technology.

The funds raised through this issue will be used for various financing activities including lending and investments, to repay existing loans and for business operations including capital expenditure and working capital requirements.
 

Taxation Aspects

  • NCDs taken in the demat form will NOT attract any TDS on the interest income. However, if NCD are taken in physical form, TDS will be applicable if the interest amount exceeds Rs. 5,000 
Interest earned on NCD Taxable as per tax slab of Investor
If sold on exchange (before 12 months) Short term capital gain / lossTaxable as per tax slab of Investor
If sold on exchange (after 12 months) Long term capital gain / lossTaxable @ 10.30% without indexation

 Positive Points

  • High Yiled of AA / AA+ instrument
  • If you fall in the lower tax bracket, post-tax returns for some options in this NCD are superior than that of tax-free bonds.

Negative factors

  • For an investor in the highest tax bracket, it doesn’t make sense to invest in these as the net returns are comparable with that of the tax-free bonds.
  • NCDs are not very liquid. Though they are listed on exchanges but trading volumes are low to get right price.

How to Apply

  • Physical Form – You can download the Form and submit to designated bank branches alongwith cheque.
  • Online – You can invest online in DMAT form through your online share trading account or through your broker.

Summary

  • Investors in lower tax slab can consider investing in these NCD, but not more than 10% of their debt allocation.
  • Investors in the 30% tax bracket should invest in tax-free bonds or go for debt funds or FMPs

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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About wealth18

The author is a Chartered Accountant and loves to write about Personal Finance, Wealth Management, Taxation etc. Disclaimer - The articles on this website is for informational and knowledge purposes and should not be treated as financial advice, Please consult your financial advisor before taking any investment decision.

2 comments

  1. CA M S Varadhan

    What is the reason behind the success of STFI? Where is its head office?

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