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Shriram Transport Fin. Jan.-20 Tranche-II NCD issue review (May apply)

Shriram Transport Finance Company Ltd Logo
  • STFCL is bringing its 12th debt offer since July 2009.
  • CRISIL, CARE and India Rating has rated this offer as AA/Stable.
  • This offer has lower coupon rates compared to its Tranche I offer of July 19.
  • The Company has a good financial track record with rising top and bottom lines.
  • Investment may be considered for the long term.


ABOUT COMPANY:

Shriram Transport Finance Co. Ltd. (STFCL) is a flagship company of Shriram group of south and is one of the largest asset financing non-banking finance companies in the organized sector in India that catering to first-time buyers and small road transport operators for financing preowned commercial vehicles. In addition, it provides commercial vehicle finance for new commercial vehicles. STFCL also provides financing for passenger commercial vehicles, multi-utility vehicles, three-wheelers and tractors as well as ancillary equipment and vehicle parts finance, such as loans for tyres and engine replacements, and provide the working capital facility for FTBs and SRTOs. The company offers financial services to commercial vehicle operators, thereby providing comprehensive financing solutions to the road logistics industry in India.

As of March 31, 2019, it had 1,545 branches across India, including most of the major commercial vehicle hubs along various road transportation routes in India. The company also established presence in 838 rural centres as of March 31, 2019, with a view towards increasing its market share in the pre-owned commercial vehicle market and reaching out to a relatively newer customer segment in rural areas. It has also strategically expanded marketing network and operations by entering into revenue sharing agreements with private financiers in the unorganized sector involved in commercial vehicle financing. As of March 31, 2019, the total number of employees was 26,630.

DEBT OFFER DETAILS:

For the purpose of onward lending, financing, refinancing the existing indebtedness and long term working capital needs (75% of fund mobilized) as well as general corpus fund need (25% of fund mobilized), STFCL is coming out with debt offer of Secured and/or Unsecured subordinated Redeemable Non-Convertible Debentures of Rs. 1000 each for Rs. 200 crore with a green shoe option to retain oversubscription up to Rs. 800 cr. making the overall issue size of Rs. 1000 cr. It has an overall shelf limit up to Rs. 10000 crore. 

The issue opens for subscription on 06.01.2020 and will close on or before 22.01.2020. Minimum application is to be made for 10 NCDs (i.e. Rs. 10000) and in multiples of 1 NCD (i.e. Rs. 1000) thereon, thereafter. Post allotment, NCDs will be listed on BSE and NSE. Allotment will be done on First come-first served basis. Application is to be made in ASBA mode only. This is the 12th debt offer from the company since July 2009. The company will be spending Rs. 33.35 crore to mobilize Rs. 1000 cr.

This issue is rated as CRISIL AA+/Stable by CRISIL, CARE AA+/Stable by CARE and IND AA+/Stable by India Ratings. This rating indicates that instruments with such ratings are considered to have the highest degree of safety regarding timely servicing of financial obligations and carry very low credit risk.

The Issue is jointly lead managed by J M Financial Ltd., A K Capital Services Ltd. and SMC Capitals Ltd. While Catalyst Trusteeship Ltd. is the debenture trustee Integrated Registry Management Services Pvt. Ltd. is the registrar to the issue.

These NCDs have tenures of 3 yrs., 5 yrs. and 7 yrs. It offers coupon rates ranging from 8.52% to 9.10% based on the choice of investors. Frequency of interest payments will be monthly, annually or cumulative as per the choice of investors. It is offering an additional 0.25% to Senior Citizens. Allotment of these NCDs will be in dematerialized mode only. There are no put and call options.

The specific terms of each instrument are set out below

Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 Series 8
Frequency of Interest Payment Monthly Monthly Monthly Annually Annually Annually Cumulative Cumulative
Tenor 3 Years 5 Years 7 Years 3 Years 5 Years 7 Years 3 Years 5 Years
Coupon Rate (Retail) 8.52% 8.66% 8.75% 8.85% 9.00% 9.10% NA NA
Effective Yield (per annum) 8.85% 9.00% 9.10% 8.84% 8.99% 9.09% 8.85% 9.00%
Amount on Maturity Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,000 Rs 1,289.99 Rs 1,539.35
Mode of Payment Through Various Options Available


FINANCIAL DATA:

On a consolidated basis, STFCL has posted total revenue/net profits of Rs. 15545.70 cr. / Rs. 2563.99 cr. (FY19). For the H1 of FY20, it has earned a net profit of Rs. 1399.30 cr. on total revenue of Rs. 8281.47 cr. As on 30.09.19, it's paid-up equity capital of Rs. 226.88 cr. has the support of free reserves of Rs. 16812.8 cr. On the said date its Tier I capital adequacy ratio stood at 16.31%.

Net-worth coverage for net NPA stood at 7.7 times as, on March 31, 2019, up from 6.4 times end fiscal 2018. Post issue, its current debt-equity ratio of 5.32 will stand enhanced to 5.38.


Conclusion / Investment Strategy

STFCL is considered investors friendly group and has loyal investors in the southern region. This offer has lower coupon rates compared to Tranche I of July 19, in line with the market trends. Investors looking for steady regular income may consider investing in this AA/Stable rated NCD issue for the long term. (Subscribe for long term).

Review By Dilip Davda on Dec 29, 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 Transport Finance NCD Jan 2020 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 Transport Finance NCD Jan 2020 worth investing. The Shriram Transport Finance NCD Jan 2020 Note sets the NCD expectations in systematic way which tells you if Shriram Transport Finance NCD Jan 2020 good to buy (good or bad / yes or no). The NCD Forecast tells you weather to invest in Shriram Transport Finance NCD Jan 2020 by providing NCD recommendations i.e. subscribe, avoid and neutral.