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Shriram Transport Fin Jan 19 Tranche-III offer review (May apply)

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•    STFCL is bringing its 10th debt offer since July 2009.
•    CRISIL and India Rating has rated this offer as AA/Stable
•    Company has good financial track record with rising top and bottom lines.
•    Investment may be considered for long term.

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 organised sector in India that catering  to first time buyers ('FTB') and small road transport operators ('SRTOs') 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 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.

For the purpose of onward lending, financing, refinancing the existing indebtness 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 Tranche-III of Rs. 1000 each for Rs. 200 crore with a green shoe option to retain oversubscription to the tune of Rs. 500 crore making the total issue size of Rs. 700 crore. STFCL has overall self limit of Rs. 5000 crore worth of debt issue.  

Issue opens for subscription on 07.01.2019 and will close on or before 31.01.19. 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 and NSE. Allotment will be done on 'First come-first served' basis. Application is to be made in ASBA mode only.  This is the 10th debt offer from the company since July 2009.

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

Issue is jointly lead managed by Axis Bank Ltd., A K Capital Services Ltd., Edelweiss Financial Services Ltd., J M Financial Ltd. and Trust Investment Advisors Pvt. 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 10 yrs.   It offers coupon rates ranging from 9.12% to 9.70% 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. There is no put and call options.

On a consolidated basis, STFCL has posted total revenue/net profits of Rs. 10361.97 cr. / Rs. 1183.62 cr. (FY16), Rs. 10904.47 cr. / Rs. 1265.63 cr. (FY17) and Rs. 12339.56 cr. / Rs. 1556.75 cr. (FY18). For H1 of FY19 it has earned net profit of Rs. 1182.48 cr. on a total revenue of Rs. 7681.83 cr.

As on 31.03.18 its gross NPAs stood at 9.16% and net NPAs at 2.83% of net loan assets, up from 8.17% and 2.66% respectively for a year ago period. Post issue, its current debt equity ratio of 6.06 will stand enhanced to 6.15 times.  As on 30.09.18 its paid up equity capital of Rs. 226.91 crore is supported by free reserves of Rs. 14332+ crore.

Conclusion / Investment Strategy

Investors looking for steady regular income may consider investment in this AA/Stable rated NCD issue for long term

Review By Dilip Davda on December 29, 2018

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.


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