Sunday, June 26, 2011

Sriram Transport Non Convertible Debenture

As the Equity markets go in a sideways to a downward kind of move, its time to look at other investment avenues. Sriram Transport is coming up with non-convertible debentures offering upto 11.60 % interest.

What are non convertible debentures?
They are debt instruments offered by the company which offer you an annual interest of 11.60% payable annually. These bonds are traded on the NSE and which means you can sell them if you need the money immediately.

How safe are they?
The company is rated as AA by Rating agencies which means the company is pretty stable. The Debt is secured which means if the company goes bankrupt you will be ahead in the queue of people who get their money. This is better than Fixed Deposits.

What is the downside to investing in these NCDs?
Sriram Transport is a middle of the road company not as well known as Tata Capital or L&T Finance. Those NCDs are trading at a yield of 10 pc.

What should one do?
If one has no exposure to NCDs, then one should first look at L&T Finance NCD which gives an yield of 10 pc. One should restrict themselves to a small quantity of Sriram Transport NCD to get the higher yield. This is a risk worth taking if one allocates say 5 pc of one's Debt portfolio max to this offering.

Point worth noting:
This is on a first come first saved basis offering. The issue opens on Monday and closes on 9th July. If interested, please apply early.

The Details of this issue are available at below link:

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