If you are looking for a better investment than bank fixed deposits (FD), there may not be many fixed income options available in the market. In the present scenario, the interest rates on bank fixed deposits may not appear attractive. In most leading banks, the FD interest rate is around 6.5 per cent per annum across different tenures. Even the interest rate of most post office schemes is around 7.5 per cent over the 1 to 5-year tenure.
For those looking to deposit money at a higher interest rate, the Shriram Transport Finance Company NCD offer may be considered. The company is coming out with its Tranche 2 Issue of NCDs issuing Secured Redeemable Non-Convertible Debentures (NCDs) of the face value of Rs. 1,000 each. The Tranche 2 Issue will open for subscription on Monday, January 06, 2020, and is scheduled to close on Wednesday, January 22, 2020, with an option of early closure or extension. Remember, the higher return comes with higher risk as well and one should, therefore, invest based on one’s risk profile.
Investment options
One may choose to invest for 3 years, 5 years or 7 years with monthly, annual and cumulative interest payment option. However, the cumulative interest payment option is only available in the 3 years and 5 years tenure.
Rate of interest
These NCDs, bearing a fixed rate of interest, are being offered under 8 (eight) different series:
Series I, II and III are monthly interest payment options, having a tenor of 3, 5 and 7 years respectively and the monthly Coupon shall be 8.52 per cent per annum, 8.66 per cent per annum and 8.75 per cent per annum respectively.
For Series IV, V and VI interest is payable annually, having a tenor of 3, 5, 7 years respectively, and the coupon shall be 8.85 per cent per annum, 9.00 per cent per annum, 9.10 per cent per annum respectively.
Series VII and VIII are cumulative options, having a tenor of 3 and 5 years respectively, where face value and interest accrued are paid at the end of the tenor and will be redeemed at Rs. 1289.99, and Rs. 1539.35 per NCD respectively.
Effective yield for Series VII and VIII shall be 8.85 per cent per annum and 9.00 per cent per annum respectively.
Additionally, Senior Citizens who are initial allottees under Category III and Category IV are entitled to an additional incentive of 0.25 per cent per annum across all series. Accordingly, the amount payable on redemption to such Senior Citizens for NCDs under Series VII and Series VIII is Rs. 1298.91 and Rs. 1557.11 per NCD respectively.
Safety
The NCDs are rated ‘CARE AA+; Stable’ by CARE Ratings Limited, ‘CRISIL AA+/Stable’ by CRISIL Limited and ‘IND AA+: Outlook Stable’ by India Ratings and Research Private Limited. The ratings indicate high degree of safety regarding timely servicing of financial obligations and carry very low credit risk, however, the rating may change over time.
Liquidity
For liquidity needs, one can sell the NCDs on stock exchanges. The NCDs are proposed to be listed on the National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE) and NSE shall be Designated Stock Exchange.
NCDs are relatively riskier investment products compared to bank FDs and post office schemes. Based on one’s risk appetite, financial goals investing a portion of the money may be considered in NCDs.
