Shriram Transport Finance Company will hit the market with its second non-convertible debenture (NCD) issue on October 7, looking to raise R500 crore from the market. The issue comes against the backdrop of a pick-up in retail demand for such NCDs that are offering higher rates of return to investors.
"Demand in the retail segment was strong even in our last issue where we raised Rs 750 crore through NCDs in July. We want to look at retail investors because they tend to remain for the long term. That's why we increased our rates to attract them,” said Parag Sharma, executive director and chief financial officer at Shriram Transport Finance Company.
The issue size is R250 crore with a green-shoe option of R250 crore and offers a yield of 11.25% for the tenure of three years, 11.5% for the tenure of five years and 11.75% for the tenure of five years for retail investors. The issue is expected to close on October 21.
The total quota for retail investors is 80% and the company is offering 35 bps more than their previous issue in July. The company also said it is not ruling out another public issue later this year depending on the market conditions.
Four NBFCs -- Srei Infrastructure Finance, Shriram Transport Finance Company, Rural Electrification Corp and Muthoot Finance -- have tapped the NCD route so far in 2013-14, raising a total of R4,800 crore so far this fiscal. The amount raised was much higher than the R1,700 crore initially targetted. On an average, 50% of the issue has been picked up retail investors.
Bankers and companies say that retail investors have been attracted to NCDs as they are offering between 11% and 12% while comparable five-year term deposits are offering a return of about 8.75%.
In September, REC managed to raise R3,500 crore three days before the issue was scheduled to close while India Infoline Finance (IIFL) raised R1,200 crore against a base size of R525 crore. Muthoot Finance raked in R324 crore against the target of R150 crore and Srei Infrastructure Finance, which has launched two issues so far this fiscal, raked in R239 crore cumulatively.