Retail investors covet NCDs

Tags: News
Seeing strong retail demand for non-convertible debentures (NCDs) with attractive coupon rates, issuers are setting aside a larger portion of the issue size for retail investors. Also, allotments to retail and HNIs are being made on priority basis.

In the recently concluded Shriram Transport Finance NCD issue, 50 per cent of the issue size was reserved for retail investors and 30 per cent for HNIs, while it was 10 per cent for qualified institutional buyers and 10 per cent for corporate entities.

ECL Finance -- the NBFC arm of Edelweiss Financial Services -- allotted 61.25 per cent of the total issue size to retail and high net worth individuals in their NCD issue in June.

Some of the recent NCDs issues like Shriram Transport, ECL Finance and India Infoline were not only oversubscribed, but even the greenshoe options portion was fully subscribed, thanks to the high retail subscription.

In case of Shriram Transport Finance’s NCDs issue, which successfully raised Rs 1,974 crore from the market in just three days during July 2-4, applications worth Rs 1,500 crore were received from retail and HNI investors on the first day itself.

The Shriram Transport Finance’s NCD issue, originally scheduled for July 2-22, was closed earlier due to the overwhelming response from retail (below Rs 5 lakh investment limit) and high net worth investors (above Rs 5 lakh).

Shriram Transport had planned to raise only Rs 1,500 crore as first tranche but retained application worth Rs 1,974 crore.

Umesh Revankar, managing director & CEO, Shriram Transport Finance Company, told Financial Chronicle that out of Rs 1,974 crore raised, allotments to retail investors were worth Rs 510 crore and high net worth investors was Rs 1,454 crore while corporate investors were allotted NCDs worth Rs 10 crore.

Rajeev Garg, VP, marketing, Shriram Transport Finance said, “The issue received about 32,000 applications. There was good response from senior citizens too as per information received from the registrar for the public issue.” Senior citizens were offered 0.25 per cent extra yield in NCDs as first applicants in the issue.

Shriram Transport will be paying an interest ranging between 9.85 per cent and 11.50 per cent per annum on these NCDs, which were listed on NSE and BSE on July 16.

The NCDs are listed on stock exchanges BSE and NSE, providing easy liquidity to retail investors if they want to exit prematurely.

Shriram Transport's NCD issue had been given AA/Stable rating by Crisil, ‘AA+ ' by Care and AA+’ by India Ratings and Research for an amount of up to Rs 3,000 crore.

Earlier, retail and high net worth investors were allotted 61.25 per cent of the total issue size by ECL Finance in their NCD issue in the month of June.

ECL Finance NCD offered investors attractive interest of 12 per cent per annum.

Ajay Manglunia, senior VP, Edelweiss Securities said, “We collected Rs 150 crore from retail investors, Rs 95 crore from HNIs in the recent NCD issue and allotted NCDs worth Rs 245 crore to retail and HNIs, making full allotments to them. From qualified institutional buyers we collected Rs 205 crore and allotted them NCDs worth Rs 155 crore.”

In India Infoline's Rs 200 crore NCD issue which concluded in March, retail investors got allotment worth Rs 100 crore, HNIs got NCDs worth Rs 20 crore and institutional investors were allotted NCDs worth Rs 80 crore.

Earlier in January 2014, the Rs 500 crore NCD issue from Edelweiss subsidiary was also oversubscribed in just two days and the issue was closed on the third day. In that issue too, retail investors applied for Rs 210 crore worth of NCDs and were allotted 40 per cent of NCDs worth Rs 200 crore. HNIs were also allotted NCDs worth Rs 100 crore and their quota was fully subscribed. The corporate quota was undersubscribed at Rs 85 crore as against Rs 100 crore quota.

More corporate entities may take the NCD route for raising money, with interest rate remaining high.

Umesh Revankar of Shriram Transport Finance Company said, “I don’t see any change in interest rate for some time because inflation is high.”

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