Shriram City Union Tranche-II Aug 2019 NCD issue review (Subscribe)

  • SCUFL comes with Tranche II offer after April 2019.
  • Issue is rated CARE AA/Stable and CRISIL AA/Stable.
  • The company has a shelf limit of Rs 3000 crore.
  • This offer has little higher coupon rates against previous offer.

About Company

Shriram City Union Finance Ltd. (SCUFL)., which raised four tranches of debt offers in August 2011, September 2012, November 2013 and April 2014, is coming to raise debt funds after a gap of 5 years. Shriram group is a south based investor friendly group. SCUFL is a deposit-taking NBFC under Shriram Group of companies and a prominent financial service conglomerate in India. It offers multiple product offerings including small enterprise/MSME financing, loans against gold, financing for two-wheelers, auto loans, personal loans and housing finance loans. This company is a part of the Shriram Group.

Having commenced operations in 1986, SCUFL has established a pan-India presence. As on June 30, 2019, it had 1036 business outlets across India, out of 966 of Company's business outlets, 660 business outlets are located in the southern states of Tamil Nadu, Kerala, Andhra Pradesh, Telangana and Karnataka. ON the said date it had a total 28987 employees.

Debt Issue Details

For the purpose of onward lending and repayment of interest and principal of existing loans (75% of fund mobilized) as well as general corpus fund need (25% of fund mobilized), SCUFL is coming out with debt offer of Secured and Unsecured Redeemable Non-Convertible Debentures of Rs 1000 each for Rs 100 crore with a green shoe option to retain oversubscription to the tune of Rs 900 crore making the total issue size of Rs 1000 crore (against shelf limit of Rs 3000 cr.) under Tranche-II. Issue opens for subscription on 21.08.19 and will close on or before 19.09.19. Minimum application is to be made for 10 NCDs (i.e. Rs 10000) and in multiple of 1 NCD (i.e. Rs 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE. Allotment will be done on "First come-First served" basis).

This issue is rated as CARE AA/Stable by CARE and CRISIL AA/Stable by CRISIL. These ratings indicate that instruments with such ratings are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Issue is jointly lead managed by A K Capital Services Ltd. and Edelweiss Financial Services Ltd, while Integrated Registry Management Services Pvt. Ltd. is the registrar to the issue. Catalyst Trusteeship Ltd. is the debenture trustee.

Terms and conditions in connection with Secured NCDs****Series

I

II

III

IV

V

VI

VII

VIII 

Frequency of Interest Payment

Annual

Cumulative

Annual

Monthly

Cumulative

Annual

Monthly

Cumulative

Minimum Application

Rs 10,000 (10 NCDs)

In multiples of thereafter

Rs 1,000 (1 NCD)

Face Value of Secured NCDs (Rs / NCD)

Rs 1,000

Issue Price (Rs / NCD)

Rs 1,000

Tenor from Deemed Date of Allotment

24 months

24 months

36 months

36 months

36 months

60 months

60 months

60 months

Coupon Rate (% per annum)

9.55%

N.A.

9.70%

9.30%

N.A.

9.85%

9.45%

NA

Effective Yield (Per annum)

9.54%

9.55%

9.69%

9.70%

9.70%

9.84%

9.86%

9.85%

Mode of Interest Payment

Through various options available

Redemption Amount (Rs / NCD****

Rs 1,000

Rs 1,200.45

Rs 1,000

Rs 1,000

Rs 1,320.50

Rs 1,000

Rs 1,000

Rs 1,600.40

Maturity Date (From Deemed Date of Allotment)

24 months

24 months

36 months

36 months

36 months

60 months

60 months

60 months

Nature of indebtedness

Secured rated listed non-convertible debentures

Put and Call Options

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

N.A.

These NCDs have tenures of 24, 36, and 60 months. It offers coupon rates ranging from 9.306% to 9.85% based on selection of investors. Frequency of interest payments will be Monthly, Annually or cumulative as per the choice of investors. Allotment of these NCDs will be in dematerialized mode only. Application is to be made through ASBA mode only. This offer has allocation of 10% for Institutions Investors, 10% for Non Institutional Investors, 40% for HNIs and 40% for Retail investors.

Financial Data

For the last three fiscal, SCUFL has (on a consolidated basis) posted total revenue/net profits of Rs 4656.26 cr. / Rs 578.09 cr. (FY17), Rs 5303.11 cr. / Rs 687.11 cr. (FY18) and Rs 6069.86 cr. / Rs 1005.53 cr. (FY19). For Q1 of FY20 ended on 30.06.19 it has earned net profit of Rs 260.04 cr. on total revenue of Rs 1572.88 cr.

It's Net NPAs (on Net advances basis) stood at 4.97% for FY18 that rose to 5.02% for FY19. This remains major concern as the industry it serves is witnessing slowdown and may worsen the situation going forward. For the said periods its debt equity ratio was 4.05 and 3.73 respectively. Post issue this debt equity will stand enhanced to 4.19.

As on 30.06.19, SCUFL has a paid up equity capital of Rs 66 crore and a net worth ofRs 8510 cr.


Conclusion / Investment Strategy

Considering rating, financial data and standing of this group in the southern region, issue is worth considering. Investors may consider investment for long term for steady income. (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Aug 21, 2019

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The Shriram City NCD Aug 2019 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered NCD Analysts tells you if Shriram City NCD Aug 2019 worth investing. The Shriram City NCD Aug 2019 Note sets the NCD expectations in systematic way which tells you if Shriram City NCD Aug 2019 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Shriram City NCD Aug 2019 by providing NCD recommendations i.e. subscribe, avoid and neutral.


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