Home >Money >Personal Finance >Shriram City Union Finance issues NCDs with interest rates up to 9.85%

An issue of secured non-convertible debentures (NCDs) from Shriram City Union Finance will open on 21st August and close on 19th September, 2019. The company is seeking to raise Rs100 crore with the option to retain another Rs900 crore in case of oversubscription. The NCDs have been rated AA Stable by CRISIL and CARE. Shriram City Union Finance is a Non-Banking Finance Company (NBFC) which primarily lends money to small businesses. It also gives out two wheeler loans, auto loans, loans against gold, personal loans and housing finance loans. The company is registered as a deposit taking NBFC with the RBI and hence allowed to accept public deposits. The company is offering interest rates (formally called coupon) up to 9.85% in the current NCD tranche.

The NCD will be offered for tenures of 24 months, 36 months and 60 months respectively with annual, monthly and cumulative payment frequencies. The coupon rates range from 9.30% (for a 36 month tenor) to 9.85% for a 60 month tenor. The other coupon rates are 9.55% for a 24 month tenor (annual payment) and 9.70% (annual payment) and 9.30% (monthly payment) for a 36 month tenor. For 60 months, the company is offering coupons of 9.85% (annual) and 9.45% (monthly). In addition it is also offering cumulative options (interest paid on maturity) for 24 months, 36 months and 60 months and yields of 9.55%, 9.70% and 9.85%, respectively.

Should you subscribe?

NCDs are highly risky instruments and have poor liquidity. That said, Shriram City Union Finance has been rated AA (Stable) by CRISIL and CARE and has a strong reputation as a borrower. The rate offered is also relatively attractive. The interest on NCDs is taxable at your slab rate but TDS is not deducted on the interest paid out by listed NCDs. However investors should note that a debt mutual fund on the other hand is both more diversified (it holds a variety of NCDs and other types of debt) and hence carries lower risk. It also enjoys favourable taxation of 20% long term capital gains tax along with the benefit of indexation if held for longer than 3 years. Only investors with a high risk appetite should invest in this NCD.

How to Apply

If you still want to apply for the debenture issue, you need to submit an application form to your bank or broker, authorizing the intermediary to block the amount. The bank needs to be a self-certified syndicate bank (SCSB), a list of which you can get here.

Some banks or brokers will allow you to submit this form online.

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