Shriram Transport Finance Bond issue lists at premium

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Shriram Transport Finance Limited had come out with a bond issue for Rs 500 crs with an option to retain oversubscription of upto 500 crs, making it an issue for Rs 1,000 crs. The issue had a reservation of Rs 400 crs for retial investors who could apply for upto Rs 5 lacs each. The issue received excellent response and was oversubscribed on day one. Retail investors were allotted 138 bonds for 500 that they had applied for making the ratio as 27.6%. The issue in retail was subscribed 3.62 times.

The company had issued bonds in two maturity periods of 3 years and 5 years respectively. The coupon rates for retail were 11.35% and 11.6% respectively. For other categories the rates were lower and for the QIB category the rates were 11% and 11.10%. The bonds got off to brisk trading and the most active was the 5 year 11.6% bond which saw the price rise to Rs 1035 against the issue price of Rs 1000.

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The bond has been a success and following the huge success which was received by the bond issue from State Bank of India and now this issue, there are many more issuers lined up. It is believed that gold finance companies Mannapuram and Muthoot are likely to come out with issues in the near future. There are talks that India Infoline and Shriram City Union are also having bond isues in the pipeline and a few PSU banks make follow the lead set by SBI and also raise money by way of bonds from the market.

It would be interesting to see at what coupon rates these issues come and also the tenure. There is a risk that with primary markets not doing well and retail investors getting “listing gains” on bonds as well, bad quality paper may get undue response which may make the market risky.

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