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Shriram Transport Finance NCD -Tranche 2 offer review (May apply)

Shriram Transport Finance Company Ltd Logo

•    STFCL is leading asset financing NBFC from south.
•    Company enjoys investors’ confidence.
•    First time, ASBA is mandatory for application process.
•    Allotment will be on ‘First come – First Served' basis.

Shriram Transport Finance Co. Ltd. (STFCL) is one of the largest asset financing non-banking finance companies in the organized sector in India that cater to first time buyers ('FTB') and small road transport operators ('SRTOs') for financing pre-owned commercial vehicles. In addition, it provides commercial vehicle finance for new commercial vehicles. The company 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. STFCL offers financial services to commercial vehicle operators, thereby providing comprehensive financing solutions to the road logistics industry in India.

The company is coming out with its debt offer of Tranche 2 secured redeemable non-convertible debentures (NCDs) with a base size of Rs. 300 cr. with a green shoe option for keeping additional Rs. 1050 cr. from oversubscription. Thus the shelf limit is Rs. 1350 cr. The company is offering NCDs having face value of Rs. 1000 each. Minimum application is to be made for 10 NCDs (Rs. 10000) and in multiples of Rs. 1000 (1 NCD) thereon, thereafter. For the first time, application for this issue is made mandatory through ASBA mode and allotment will be in demat mode only. Allotment will be done on 'First Come – First Served' basis. Issue opens on 15.10.18 and will close on or before 29.10.18. Post allotment, NCDs will be listed on BSE and NSE. Funds mobilized through this offer will be used for the purpose of onward lending, financing, and for repayment/ prepayment of interest and principal of existing borrowings of the Company; and General corporate purposes.

These NCDs have tenures of 3 yrs, 5 yrs and 10 yrs. It offers coupon rates ranging from 9.12% to 9.70%. Interest payment options are Monthly, Annually or Cumulative. This debt offer is rated CRISIL/AA+ Stable by CRISIL and IND/AA+ Stable by India Ratings. This grading indicate that instruments with this rating are considered to have high 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.  Catalyst Trusteeship Ltd. is the Debenture Trustee while Integrated Registry Management Services Pvt. Ltd. is the registrar to the issue.

On financial performance front, for Q1 of FY19, STFCL has posted turnover/net profits of Rs. 3739.85 cr. /Rs. 572.90 cr. against Rs. 3118.68 cr. / Rs.460.02 cr. for corresponding previous quarter. As on 30.09.18 its equity capital of Rs. 226.91 cr. is supported by free reserves of Rs. 12915 cr. plus. As on 31.03.18 it’s gross /net NPAs were 9.16% / 2.83% against 8.17%/2.66% as at 31.03.17. Its debt equity ratio would increase from 5.04 to 5.43.

Conclusion / Investment Strategy

Considering rating, good financial data and fancy of STFCL among investors, investors looking for fixed income may consider investment for long term.

Review By Dilip Davda on October 9, 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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