Shriram Transport NCDs to list on Aug 21; look to buy

The 2012 non convertible debentures (NCD) of Shriram Transport Finance Company are slated to be listed on the bourses on August 21. If the NCDs list at a discount to the offer price of Rs 1000, it may be an excellent opportunity to buy into the NCDs, as the yields are significantly higher than bank yields.

The coupon rates for those buying from the stock markets, is in the range of 10.25 to 10.50% and any discount to face value on listing would improve the yields on the NCDs. Of course original allottees are getting significantly higher coupon rates of up to 11.40%, which is an excellent coupon rate.

However, those buying from the market might also be able to get high yields, provided the NCDs list at a significant discount.

If one buys the NCDs at a discount one can get a good yield, which may even go upto 11%. PSU banks are offering a maximum of 9.5% currently on their term deposits.

Of course, PSU banks term deposits have a majority holding by the Government of India and are extremely safe, when compared to Shriram Transport Finance. However, Shriram Transport is an extremely sound company and the risk of default from the company is low. The NCDs are rated AA/Stable by CRISIL and CARE AA+ by CARE.

Further, these are secured debt instruments so that lends them additional safety as well.

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