Today I saw this new bond issue:
the attractive points are:
1. the maximum duration is 5 years so the money will not be blocked for very long
2. The company plans to list its NCD issue. Which means exit would be easy and also there will not be any TDS.
3. The interest rate for this AA rated bond issue is 11+% which is significantly higher than what one earns in Bank Fixed Deposit.
4. The leverage ratio of the company is manageable.
However the reasons why I would not be subscribing to the issue are:
1. Boring Annual report: As Warren Buffet once said for any small company annual report is a wonderful advertising issue. It allows the board and the management to explain its policies, give the vision, mission and road map and set hopes. If the investor believe that the company is going to the right path and believe in it, they are patient with the company. This confidence allows the management to take long term strategic decisions which help in creating shareholder value.
Since I did not enjoy reading the STFC’s annual report, I wonder if it will be worth investing in the company. Please do remember that equity holders always have an easy exit options, while the bond/debenture holder are stuck with the company for 5 years.
2. Vehicle Finance: Several banks had problems in controlling their NPA and some of them have even quit/limited their exposure in vehicle finance. This raises a question why would I live to lend money to someone who is solely concentrated in vehicle finance.
3. Group performance: Shriram does not have a stellar track record. One of its group company Shriram Finance has stopped quoting, and rest are doing moderately ok.
Hence in spite of the fact that I have some free cash (which I intend to move from low interest FD to a bond), I am not subscribing to the issue.
Disclaimer: I am no financial analyst
11 replies on “Shriram Transport Finance Corporation NCD”
Was looking for some data on Shriram Transport Finance NCD and here I am on your blog…Well, I’m also not a financial analyst, so can’t say whether you are right or wrong but will definitely consider your points.
Shriram is a seasoned transport finance player and yes as u pointed out they are not immune to recession and due to lax laws they also get away as most finance cos do.
Adani pwr is making a big buzz and is oversubscribed already !
The points you brought out gave a good analysis of the issue and helped me in arriving at the investement decision. Thanks and regards.
@swapna & jerrish.
I am glad to be of any help 🙂
you might invest for short term in adani.. but it also does not make too much of long term sense.. hydel power would be much betterr
WOW same assessment here just posted on it…
I am holding Shriram Transport Finance shares for past 10 years, performance improving every year. Even many banks failed in what Shriram Transport is doing and many banks are lending money to STFC to do the vehicle finance. I am gung ho about it. STFC NCD can not be compared with Adani Power. Compare it with medium size private bank Fixed Deposit
comparing and IPO with a NCD is like comparing apples and oranges. and no body is doing that. Prax asked what is my strategy on this issue and i replied about it
as they say all that glitters is not gold ? most of the south based cos are very conservative ans have a very modest existence (though there are exceptions)
according to me investment descisions should be based on fundas and not on GLITZ and GLAMOUR. you have seen issues of HYPE like Reliance POWER and also SATYAM (which won many awards for corporate governance).
i am intrigued by your methodology of investing ankur but i think a boring annual report funda by buffet should be for investing in its stocks since he invests on fundamentals and not a criteria for investing in bonds
btw what do you think of our analysis
welcome to E-Nagar and good to see you here 🙂
I agree that Annual Report funda was proposed for equity investments.
In case of Wockhardt hospitals, bad investment practices led to substantial erosion of value. Their ECB/bonds are trading at half the face value. Hence whenever I loan someone money, I believe it is my duty to ensure that they can use it productively.
I WANT TO KNOW THE BSE SCROLL NO TO SELL AND BUY THE NCD OF SHRIRAM TRANSPORT