Shriram City Union Finance NCD Issue - August 2011

Alchemist

Administrator
Staff member
#1
Shriram City Union Finance NCD Issue.

Opens: 11th August 2011.
Closes: 27th August 2011.

Listing: NSE and BSE.

Credit Rating: AA (CARE) and AA-/Stable (CRISIL).

60 month NCD offers 12.10% to retail investors.
36 month NCD offers 11.85% to retail investors.

60 month NCD has call/put option at the end of 48 months.

Annual interest payment.

Please note:

These NCDs are being offered by Shriram City Union Finance and not Shriram Transport Finance Company.

The rates are pretty attractive and I may apply for some debentures.

 

San Yad

Active member
#2
Grade-wise both IIFL and Shriram City Union Finance NCDs are similar.

Except the interest rate, which one is more secure if Shriram City Union Finance is not a subsidiary of Shriram Transport Finance Company?

Are you thinking for 60 months or 36 months NCD and how much amount would you like to park?

Is it something similar like L&T finance Ltd (recent IPO) and L&T itself?

(Guess both are inter-related)

I assume it is a long term investment and there would be no tax on interest earned yearly. Is that correct?

Happy Investing!
 
#3
I assume it is a long term investment and there would be no tax on interest earned yearly. Is that correct?
Income from NCDs comes under two heads.

The interest income comes under income from other sources. So it is taxable as per your slab.

The appreciation in price is considered as capital gains. As there is no STT, STCG are taxed at normal slab. LTCG will be taxed @10%. Please note no indexation benefit is available on bonds.
 

Alchemist

Administrator
Staff member
#4
Except the interest rate, which one is more secure if Shriram City Union Finance is not a subsidiary of Shriram Transport Finance Company?

Are you thinking for 60 months or 36 months NCD and how much amount would you like to park?

I assume it is a long term investment and there would be no tax on interest earned yearly. Is that correct?
Shriram City Union Finance is not a subsidiary of Shriram Transport Finance Company, but both belong to the same group.

Shriram City Union Finance is a subsidiary of a private company - "Shriram Enterprise Holdings Private Limited".

"Shriram Enterprise Holdings Private Limited" is a subsidiary of "Shriram Retail Holdings Private Limited", which is a subsidiary of "Shriram Capital Limited".

I don't know who owns "Shriram Capital Limited".

"Shriram Retail Holdings Private Limited" also holds some shares of Shriram City Union Finance.

I think 60 month NCD would be the better option. Interest rates are likely to fall sharply in months to come. Longer-term NCD's would appreciate more when interest rates fall.

Interest from all NCDs is taxable, but TDS is not deducted for listed NCDs.
 
#6
NCD issue Vs SBI Bonds

Hi,

Kindly advise in view of forthcoming NCD issues, as I have 4 Lac invested @ 9.5 in SBI tier II bonds last year issue and 4 Lac @9.75 in SBI bonds recent issue, what to do shall I withdraw from the bonds and invest @11.90 or 12.10% NCD issues. Please guide.
 
#7
Hi,

Kindly advise in view of forthcoming NCD issues, as I have 4 Lac invested @ 9.5 in SBI tier II bonds last year issue and 4 Lac @9.75 in SBI bonds recent issue, what to do shall I withdraw from the bonds and invest @11.90 or 12.10% NCD issues. Please guide.
Yes, you can sell the SBI bonds and apply for new bonds. But keep in mind that you may not get full allotment even if you apply on first day.
 

Alchemist

Administrator
Staff member
#8
Interest coverage ratio is around 1.61 for 2010-2011, and is likely to fall further after this issue :

Shriram City Union Finance Key Financial Ratios, Shriram City Union Finance Financial Statement & Accounts

Can they continue paying interest, is this OK for long term investment ?
A coverage ratio of 1.61 is good enough for an NBFC.

Here are coverage ratios of some other NBFCs:

Shriram Transport Finance: 1.84.
IDFC: 1.66.
SREI Infrastructure Finance: 1.69.
Mahindra & Mahindra Financial Services: 2.06.

NBFCs earn a fixed interest rate and pay a fixed interest rate.

Unlike other sectors, their interest income doesn't fluctuate wildly and so they can easily operate with lower coverage ratios.
 
#9
So which Option to opt for?

I think, Option 2 (36 Months) can't be sold on exchange.

Are their any other NCD issues coming from other companies?
 
#15
Any news on subscription status?

I read somewhere that some brokers give up to 2% commission to customers. Is it true?

I have not got any commission on any of my application. As I applied for 4 lakh for Shriram City, 2% commission would mean Rs. 8000. Even if somebody is offering 0.5%, it is better than nothing.

Has anyone got the commission for applying any of the NCDs?
 
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