Shriram City Union Finance, an NBFC, has come out with a secured NCD issue which is open from 12th Sept – 26th Sept 2012.

What are secured NCDs and how safe are they?

NCDs stand for Non-convertible debentures are debt instruments issued by corporates and NBFCs (Non Banking Finance Companies) and they are secured by a charge against the companies’ assets. This means that in the event of liquidation of the company, the claims of NCD holders will be given preference over the unsecured asset holders like the share holders.

About the company

Shriram City Union Finance is a Chennai based NBFC which specializes in the area of retail finance-small business loans, 2-wheeler and 4-wheeler loans, loan against gold and personal loans.

Issue rating

The NCD issue has been rated “AA” by CARE and “AA-/STABLE” by CRISIL.

About the issue

The NCDs are compulsorily issued in the demat form and listed and tradable on the NSE & BSE. Non-residents cannot invest and no Tax at Source is deductible.

The terms of the issue and rates of interest are as follows-

• Minimum investment of Rs 10,000/- and multiples of Rs. 1000/- thereafter.
• Annual interest and cumulative options available.
• 11.50 % pa for 36 month and 11.75% pa for 60 months.
• No put/call option.

Conclusion

The interest rates offered are attractive compared to the current rates of interest offered by banks and popular company fixed deposits. The rating indicates a reasonable degree of safety. Investors looking to diversify beyond fixed deposits/fixed income instruments may consider this.

Disclaimer

The views/opinions expressed in this review are solely those of the author and do not constitute any investment recommendation.