Debt investors have a good opportunity to lock into the offers of non-convertible debentures (NCDs) of Mahindra & Mahindra (M&M) Financial Services and Shriram Transport Finance Company, say financial planners.
Shriram Transport Finance NCDs will pay as much as 9.7 per cent interest while the M&M Financial Services NCDs will pay 9.5 per cent. The issues are due to open on January 4 and January 7 respectively, and investors can put in applications for up to Rs 10 lakh each in the retail category.
With crude oil prices under control and inflation below the 4 per cent mark, the economy may be poised for lower interest rates in the coming days. Therefore, it makes sense for retail investors to lock into products which can pay a higher interest for a longer tenure.
“Given that the 10-year benchmark is trading at 7.3 per cent, investors get 200 basis points (2 percentage points) on an AAA-rated paper of Mahindra Financial, and about 240 basis points higher in Shriram Transport, which is a good opportunity for investors,” said Vikram Dalal, managing director, Synergee Capital.
He said he would prefer M&M Financial Services to Shriram Transport Finance given its AAA rating and the marginal difference in interest rates. M&M Financial Services plans to raise Rs 500 crore with a greenshoe option of Rs 3,000 crore, totalling Rs 3,500 crore, while Shriram Transport Finance can raise Rs 200 crore with a greenshoe option to retain an additional Rs 500 crore, totalling Rs 700 crore. M&M Financial Services offers tenures of 39 months, five years, eight years and unsecured NCDs in the 10-year option, Shriram Transport Finance offers secured NCDs with tenures of three, five and 10 years with a maximum coupon of 9.7 per cent.
Many investors have been looking for safe investments that can pay a little more than bank deposits. With a bank fixed deposit from the State Bank of India paying a maximum of 6.85 per cent and that from HDFC Bank paying a maximum of 7.4 per cent, these NCDs offer 200-250 basis points extra interest to investors. Debt mutual funds have been volatile in the past one year and investors have made not earned more than 7 per cent in this category.
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