Shriram Transport Finance Company Limited or (STFC) is tapping the capital markets with an issue of Secured Non Convertible Debentures aggregating upto 500 crs with an option to retain over-subscription upto Rs 500 crs. The issue opens on Monday the 27th July and closes on Friday the 14th of August. The lead managers to the issue are Enam Securities Pvt Ltd, A K Capital Services Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited.

The company is offering five different option plans with varying terms of maturity ranging from 36 months to 60 months. The rate of interest varies from 10.75% to 11.5%. STFC is a company in the financing of used or pre-owned vehicles. It also finances new vehicles provided the vehicle owner is an existing customer of the company. STFC has as of date over six lac customers and has as part of its assets under management over nine lac vehicles.

The company’s issue of NCD’s have been rated ‘CARE AA+’ by CARE and rated ‘AA (ind)’ by Fitch. STFC has been borrowing through fixed deposits for a very long time. This instrument now offers security to the traditional fixed deposit and has attractive interest rates and various time options. It may also be noted that there is no deduction of TDS (tax deducted at source) for resident debenture holders. Coming to the financials of STFC which is a registered NBFC with RBI and has a track record of over 30 years, they are impressive on all counts. The company recorded a total income of Rs 3731.13 crs and a net profit of Rs 612.40 crs for the year ended March 2009. The AUM or (assets under management) were at an impressive Rs 23281.11 crs as on 31st March 2009. The NIM (net interest margin) was at 6.99% while the Capital adequacy ratio at a healthy 16.35%. The net NPA’s (non performing assets) were at 0.83%.

If one were to look at the growth it is even more impressive. The AUM has grown at a CAGR (compounded annual growth rate) of 68% over the period 2005-2009. Over the same period Revenues have grown at a CAGR of 81.26% from Rs 345.69 crs to Rs 3731.13crs, while profit after tax has grown at a CAGR of 87.7% from Rs 49.32 crs to Rs 612.40 crs. The company has introduced a new initiative in the form of truck Bazaars to provide a suitable platform for counseling and buying and selling of commercial vehicles on a single platform and thus create a vibrant ‘used vehicle market’ . The other initiative from the Company is embarking on tapping local markets through developing partnerships with private financiers, who dominate the unorganized regional pre-owned commercial vehicle financing market.

The issue is open for three weeks and we normally see that people invest only at the last moment. The issue being a fixed income instrument has an added sweetener where interest would be given on application money provided allotment is made at the rate of 8% and at the rate of 2.5% if the application amount is refunded. Senior citizens would be entitled to an additional rate of interest of 0.25% in option one and two.

Very clearly STFC has come a long way and is poised to go further. Investors looking at fixed income with security should invest in this instrument. There is a choice of as many as five options to suit the individual needs.