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9.10% Shriram Transport Finance (STFC) NCD Jan 2020 – Details & Review

Shriram Transport Finance Company Ltd (STFC) is looking to raise up to Rs 1,000 crore through secured redeemable non-convertible debentures (NCD) offering interest of 8.52% – 9.1% for different maturities. 

This is the 2nd NCD issue for 2020 after Tata Capital Housing Finance NCD  issue is also open now.

Key Features for Shriram Transport Finance Company NCD

Issue Open Date Jan 6, 2020
Issue Closing Date Jan 22, 2020
Type of Instrument Secured redeemable NCDs 
Size of issue Rs 1000 crores (Base size: Rs 200 crores)
Minimum Investment 10 NCD (Rs 1000 per NCD)
Max Investment
Listing BSE, NSE
Credit Rating CARE AA+ /Stable, IND AA+ /Stable, CARE AA+ /Stable
Interest Monthly and Annual, Cumulative
Allocation method First Come First Serve Basis
NRI allowed? Not eligible

Interest Rate options for STFC  NCD Jan 2020

3 year 5 year 7 year 3 year 5 year 7 year 3 year 5 year
Interest Monthly Monthly Monthly Annually Annually Annually Cum. Cum.
Secured Secured Secured Secured Secured Secured Secured Secured
Rate 8.52% 8.66% 8.75% 8.85% 9% 9.1% Rs 1290 Rs 1539

There are no PUT & Call options for these Secured NCDs. (which means the NCD issuer cannot redeem before bond’s maturity and the investor cannot sell the bond to the issuer. Investor can however sell the bonds in the secondary market on exchanges.

About Company and NCD Issue

The NBFC provides financing for passenger commercial vehicles, multi-utility vehicles, three-wheelers and tractors as well as for ancillary equipment and vehicle parts such astyres and engine replacement.STFC caters to first-time buyers and small road transport operators for financing pre-owned commercial vehicles. It has a pan-India presence with a network of 1,545 branches and employs 26,630 full-time employees as of 31 March 2019

The company does not face the same asset-liability mismatch as housing finance companies Its loans are made for a much shorter tenor to thousands of small truck operators


Taxation Aspect


    • The interest earned is to be added to one’s total income, and hence is entirely taxable as per one’s income tax slab.
    • NCDs taken in the DMAT 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. Investors, if eligible, can submit For 15 G/H to avoid TDS. 

Taxation for Cumulative Interest Option:

For the cumulative option, you donot get periodic (monthly / annual ) interest. Instead you get a lumpsum amount at the maturity period. Investors are often confused if this cumulative interest received on maturity is to be treated as a capital gain or interest income. Many advisors incorrectly mis-sell saying that the income from cumulative option can be treated as Capital Gain rather than Interest income.

Note that even for Cumulative option, the amount should be treated as Interest income. This was also clarified by the experts at Moneycontrol.

Income Taxation
Interest earned on NCD Taxable as per tax slab of Investor
If sold on exchange (before 12 months) Short term capital gain / loss Taxable as per tax slab of Investor
If sold on exchange (after 12 months) Long term capital gain / loss  Taxable @ 10% without indexation

In case of an individual or HUF, being a resident, where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate mentioned above.

Tax Saving in case of Long term capital Gains

By investment in Capital Gain Bonds Under Section 54EC of the I.T. Act, long term capital gains arising to the debenture holders on transfer of their debentures in the company shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months after the date of transfer.
By investment in residential property As per the provisions of Section 54F of the I.T. Act, any long-term capital gains on transfer of a long term capital asset (not being residential house) arising to a Debenture Holder who is an individual or Hindu Undivided Family, is exempt from tax if the entire net sales consideration is utilized, within a period of one year before, or two years after the date of transfer, in purchase of a new residential house, or for construction of residential house within three years from the date of transfer

How to Apply

  • Online – You can invest online in DMAT form through your online share trading account or through your broker.


There are other NCDs available in the secondary market that are giving better yield (YTM). However, these NCDs have lower balance duration and the purchase will incur small brokerage cost.

Select – “Bonds in CM”

Positive factors

  • Attractive Interest rates of 8.7% in the market where the interest rates are declining. 

Negative factors

  • NCDs are not risk free and have default risk.
  • NCDs are not very liquid so it will be difficult to sell it before maturity. Though they are listed on exchanges but trading volumes are low to get right price.
  • As the interest is taxable, post tax returns may not be comparable to the tax free bonds (if you are in higher tax bracket). It may be better to opt for the cumulative option.

The interest on NCDs is taxed at the slab rate. Hence, investors in the highest tax bracket of 30% are likely to get a post-tax yield of 6.3%. So you can opt for Debt funds that offers diversity.


  • Attractive Interest:  Investors who are looking for steady income  can go for this NCD as the Interest rate is attractive (bit higher than 8.7% Tata Capital Housing NCD) but that is because STFC NCD is rated as AA and Tata Capital NCD is rated as AAA)
  • Capital Gain:  If the interest rates fall (most likely), these bonds are most likely be traded at premium, thereby having chance of capital gain as well (in addition to the coupon interest).

Though the interest rate is quite attractive, remember that the NCDs are not very liquid in the market. If you are ready to lock in money for that duration without much risk, then you can go for these NCD. Also, note that the NCD interest is taxable, so investor in higher tax brackets need to consider the post tax returns.

If you looking for Debt instruments only, then you can consider investing in Debt mutual funds, PPF etc.  If you are looking for better returns over long term, you should consider investing in Equity Mutual funds.